Aug 16, 2021
What is the difference between a controller and a CFO? Which does my business need? Do we need both? If you are asking those questions, give yourself a pat on the back. It means you've grown your business to a new level. But it also probably means you're experiencing some pain. Your financial reporting may be slow or inaccurate. You may be seeking new funding. You may be facing a cash crisis. You may need help deciding which metrics matter most and how to track them. There are many reasons small business owners consider beefing up their finance team. Whatever your reasons, we're glad you're thinking about it, because, from our experience, most owners wait too long to get help. It is quite possible that you've seen other businesses with CFOs and controllers who have the exact same responsibilities. This can make things confusing. Hopefully, by the time you're done reading this post, you'll have a clear understanding of what these roles typically cover, where they sometimes overlap, and how you can plan out the makeup of your finance team. The easiest place to start in a controller vs. CFO comparison is to give you a description of each role. Here is how Tech Targetdescribes a controller: A financial controller is a senior-level executive who acts as the head of accounting, and oversees the preparation of financial reports, such as balance sheets and income statements.In addition to preparing reports, the controller's responsibilities may also include compliance audits, monitoring internal controls, participating in the budgeting process and analyzing financial data to varying degrees. At some companies, financial controllers are involved in evaluating and selecting technology for use within the finance department or other related departments within the organization. Here is how Investopediadescribes a CFO: A chief financial officer (CFO) is the senior executive responsible for managing the financial actions of a company. The CFO's duties include tracking cash flow and financial planning as well as analyzing the company's financial strengths and weaknesses and proposing corrective actions. The CFO is similar to a treasurer or controller because he is responsible for managing the finance and accounting divisions and for ensuring that the company’s financial reports are accurate and completed in a timely manner. As you can see, there is a lot of overlap in these descriptions. So, as you might imagine, there are many small businesses which have a controller or a CFO, but not both. To simplify the major difference, a CFO will often be involved in fundraising and finance strategy, whereas a controller's responsibilities usually stop at ensuring accurate reporting. To give you a little more insight, here are some situations which prompt small business owners to hire a controller. Here are some situations which often prompt small business owners to hire a CFO in addition to or instead of a controller. At Driven Insights, we have clients who take advantage of Controller and/or CFO services depending on their specific needs. You can see how those services are structured in the graphic below. Learn more about our outsourced CFO services and outsourced Controller services. We often see commonalities with controller roles based on the annual revenue of the company. While some companies benefit from a fractional controller starting at $500K to $1MM, almost all companies have a controller by the time they reach $10MM in annual revenue. At $1MM, the controller is likely doing some of the harder transactions for a bookkeeper (playing “down” in the role), serving as a sounding board for the bookkeeper, and overseeing basic reporting and processes. If there is no CFO, he/she is often the financial advisor for the CEO (playing “up” in the role) by interpreting financial reports and sounding warnings. By $10MM, the controller is more involved with managing internal controls, closing processes and report generation, as these tasks are more intensive and time-consuming than in smaller companies. At this size, there are many more moving parts in the accounting function, so the role is that of a classic controller. Generally speaking, $1MM in annual revenue is a minimum threshold to bring in apart-time CFOorcontract CFO services, but some $500K businesses benefit as well. The common factor for those $500K companies is that they’re hungry to get and use financial insights. Your company will typically want to consider moving from part-time oroutsourcedCFO servicesto an in-house CFO at around $50MM in annual revenue. Some investor-backed companies, such as Software as a Service (SaaS) businesses, have more sophisticated needs than other companies with the same annual revenue. That sophistication means the business may need contract CFO services at $500K, rather than $1MM, and could hire a full-time CFO at around $35MM, rather than $50MM. According to CFO.com,the average cash compensation for a CFO providing CFO services for startups such as in a private company with less than $20MM in annual revenue is $194,354. CFOs for private companies with $21-$99MM in annual revenue make an average of $237,983 in base salary. (Private company CFOs make 45% less than those at public companies.) Tack on benefits and bonus and you can expect to pay $225,000 to $275,000 depending on business size. According to PayScale.com, the median compensation package for a small business controller is $80,296. The complete range of salaries varies from $50,500 to $133,400 with influencing factors including company size and location. If those numbers make you nervous, keep in mind that there are alternatives to in-house controllers and CFOs. You can save up to hundreds of thousands of dollars by engaging withan outsourced finance department provider. You can find a more detailed analysis of the cost of outsourced solutions in How Much Do Part-Time CFO Services Cost in 2018? We often see that the role of a controller changes by industry. For example, project-based businesses like general contractors might have a controller support the purchasing process to keep expenses in line and establish reporting to enable job/project profitability monitoring. A recurring revenue business, like SaaS or other subscription billing companies, would rely on a controller to monitor more sophisticated subscription billing metrics that ensure the unit economics are sound and provide transparency into revenue composition (such as churn). Controllers in very low-margin businesses like commodity contract or product manufacturers are involved in managing the razor-thin margins to ensure the sustainability of the organization. The role of CFOs tends to be consistent no matter the industry. But we we do tend to see CFOs earlier and more often in some industries, such as tech companies with a lot of investor money at stake and where rapid growth is expected. As anoutsourced finance department provider, we recruit controllers quite often. If you decide to hire a controller and/or CFO, we can help with some resources. In addition to the qualifications listed below, see our post5 Questions Every Owner Should Ask Their ControllerandThe Average CFO Salary (2018) + 28 Key CFO Interview Questions(coming soon). Qualifications of both controllers and CFOs: Qualifications specific to controllers: Qualifications specific to CFOs: One of the qualifications we mentioned above which is common to CFOs and controllers is the ability to show visually appealing and useful reports. We can show you what some great reports look like. Download our Executive Growth Reports now to see the kinds of reports a controller or CFO should deliver and keep them handy to compare with reports you receive from candidates.Controller vs. CFO: Definitions
When a Company Might Need a Controller
When a Company Might Need a CFO
An Outsourced Solution?
What Size Companies Bring in Controllers?
What Size Companies Bring in CFOs?
Controller vs. CFO Salaries
Controller Responsibilities Vary by Industry
The Qualifications of Great Controllers & CFOs
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