Experienced business owners know that making solid decisions based on accurate financial data is essential. Both the chief financial officer (CFO) and the controller are vital to making this happen.
Small business owners may be handling both financial planning and accounting duties, but any company planning on substantial growth needs a first-rate financial strategy, and to do this, you’re probably going to need two different people to put all their expertise and focus into each role.
Both CFOs and controllers usually have a background in accounting or begin their careers as accountants. An accountant’s basic role is that of record-keeping and financial reporting.
After you develop your prowess in accounting and financial reporting and are able to manage different processes and supervise people, you might move on to the position of controller.
Although many people who begin as accountants become controllers, it can not be said that the position of CFO is a natural progression from controller.
The CFO
A controller’s principal duties are implementing effective internal controls, ensuring accurate record keeping and financial reporting, managing data, and overseeing the accounting department. The role of controller is typically “backward” looking; that is to say, they safeguard assets and report what has happened.
This is in contrast to the CFO, who is a senior executive with the primary task of establishing new avenues of financing, creating and implementing a financial plan, and proposing corrective measures when necessary. The CFO is said to be a “forward” looking role, focused on business expansion and future financial management.
CFOs, more often than not, come from a background of finance and banking as opposed to controllers who mainly have an accounting background. However, many controllers do eventually progress into a CFO role if they have the right skill set.
Analyzing Reports, Managing Compliance, Developing Policies
Being the head of an organization’s financial department, the CFO supervises reports and financial statements that are produced and compiled by a controller and their team of accountants. The CFO will also analyze these reports and interpret the data. This information will then be used to create a plan or benchmark against the company’s existing goals.
Many times, executives will have a high-level comprehension of the legal regulations that pertain to their specific industry. In coordination with their compliance department, they will ensure that the company adheres to these standards, preventing the company from being penalized or subjected to a lawsuit. If the CFO works for a public company, they will also manage public disclosures and carry out duties related to shareholders.
Apart from overseeing day-to-day operations, they consult with other executives and colleagues to produce and enhance corporate policy and use their understanding of the industry to create strategies that will help the company achieve its goals.
Vital Skills for CFOs
CFOs must cultivate any number of essential skills, not least among them is the ability to lead others. There are three critical divisions that report directly to a company’s CFO: accounting, treasury, and tax. More and more, CFOs are being tapped to manage IT and HR as well. This often leads to CFOs taking on the title of chief operating officer (COO).
As the head of these divisions, a CFO is often relied upon to hire and mentor employees. Being able to identify talent and develop that talent is the hallmark of a great CFO.
But perhaps the most important skill set for a CFO is the ability to extract valuable information from financial data and turn that data into an actionable plan. Much of their time and effort is spent on analytics.
An effective CFO should also be able to cultivate strong relationships with people within the organization and colleagues throughout his or her industry. Being a part of the executive team, they will collaborate with the CEO, COO, and others. It’s important for a CFO to remain aware of changes in the industry and build trust with other financial leaders to help them to stay up-to-date.
All of these skills are necessary to achieve the primary goal of a CFO, which is to help their company succeed and achieve long-term growth.
The Controller
The central role of a controller is to oversee and direct a company’s accounting functions, but a controller’s role continues to expand beyond that of a mere “bean-counter.” Not only does he need to be aware of every financial transaction that takes place, but he also needs to understand the significance of every data point. With software like DataRails that bring together all of your organizational data, Controllers have greater insight into the numbers and awareness into transactions that took place.
A controller reports directly to the company’s CFO, and his responsibilities might vary greatly depending on the size of the company, the complexity of its accounting operations, and the number of people within the accounting department.
Within smaller companies, a controller might perform cash management functions as well as oversee accounts receivable, accounts payable, disbursement of cash, payroll functions, and bank reconciliation functions.
Internal Controls, Financial Reporting, Financial Analysis
One of the key roles of a financial controller is to establish and carry out internal controls over a company’s accounting and financial procedures. This includes examining and approving all invoices in addition to reviewing accounts receivable reports.
If the controller is working for a smaller company they might personally handle collections on invoices, particularly if the invoice is overdue. On the other hand monitoring accounts payable to ensure vendor payments align with the cash flow strategy of the firm might be an important task of the controller.
In cases where the company is working with an external accounting firm, the controller will need to oversee them to prepare the company’s various tax returns. It is also the responsibility of the controller to keep the company’s records organized and assist with internal audits.
One of the most crucial tasks a controller must perform is to provide financial data and work with the CFO to integrate financial plans with business operations. The controller is responsible for the accurate preparation of cash flow reports, balance sheets, PnL statements, projections, budgets, and budgets-to-actuals. To prepare these reports, controllers can leverage financial analytics software to greatly improve and speed up reporting procedures.
And more so today than at any other time in the past, the controller is expected to provide in-depth financial analysis and an expert financial perspective. Not only do controllers need to have accounting expertise, but they must also be skillful in understanding how to interpret complex transactions or obscure financial data. While a CFO is ultimately responsible for the company’s financial policy, controllers can help the CFO to make informed policy decisions by assessing risk and analyzing efficiency.