“What is” vs. “what should”
The Controller shows what the numbers are, while the CFO explains what you should do—because of those numbers.
We all want growth
All companies want growth. It has obvious benefits: you get to hire new talent, reach new market segments, expand to other locations, and, most of all, increase profit and company value. But growth also springs from financial complexities. Invoices pile up, customers demand more, cash flow gets squeezed, and bankers seem elusive. Before you know it, you’re spending many more hours dealing with the numbers than doing what you loved when you started the business.
This is when business leaders think about hiring a Controller or a CFO.
Many mistakenly confuse these roles or believe they are essentially the same. Nothing could be further from reality.
In this article, we will explore what those differences are.
What is a Controller?
A Controller has one primary job: To produce accurate and timely financial statements every month. This includes day-to-day bookkeeping, payroll, billings, collections, bank reconciliations, and month-end close. When they finally close the books and deliver the financials, they typically turn their attention to ad hoc projects or improving the processes to facilitate the next close. At its core, this is a manufacturing job that has one key product: your financials—reporting your historical performance.
What is a CFO?
A CFO’s job starts where the Controller’s ends. A good CFO is all about the future. A CFO will take the financials and start assessing what’s working or not, what needs to change, and then define where and how changes should be executed for maximum impact.
Their input holds significant weight when it comes to investment decisions, how a company’s capital is utilized, and how its income and expenditures are managed.
Controller vs. CFO: The differences
Think of your company as a cargo ship and you are its captain. A Controller will regularly report how far the ship has traveled, how much cargo is on board, and how much fuel remains at any given moment.
Simultaneously, the CFO uses that data to intelligently navigate the ship to its destination and get there as fast as possible, and with few (financial) surprises, storms o r stops along the way. To do this, a CFO considers the past and present data to predict and plan the future accordingly.
- CFOs are forward thinkers: CFOs collaborate with other executives in developing long-term plans of action, such as financial planning, procuring capital investments, succession planning, M&A, divestitures, or joint ventures. Controllers, on the other hand, assist CFOs in these decisions by providing daily, monthly, and quarterly historical data, via financial reports and spreadsheets. A CFO can look at the data to see their current progress and then predict and make future decisions.
- CFOs are planning-driven: Controllers give the necessary blocks upon which a CFO builds a solid financial structure to keep the company secure and on its way to success. While Controllers are useful for specific processes, such as gathering tax information or reviewing past expenses and quarterly reports, CFOs work on long-term goals: minimizing project costs, increasing shareholder value, negotiating acquisitions, securing new loans or investment capital, and plotting a company’s financial position years in advance, identifying and mitigating risks well before they happen.
- CFO are agents of change: A CFO develops and executes comprehensive financial growth initiatives. They reach into their years of experience to find the right tactics to address present financial challenges and skirt around future threats. Since they usually have expansive practical knowledge under their belt, they have a birds-eye view of both opportunities and possible challenges and the actions the organization must take to address these.
Should you hire your current Controller as a CFO?
The only benefit of hiring your Controller is that they hold an intimate knowledge of your company’s accounting history and report internally and with taxing authorities. They know the numbers and can quickly give you data on how you performed over the last few months or years. But because their focus is on the production of numbers and reports it is rare that they have the time or aptitude to look up and interpret the data or provide any real meaning to those data or derive actionable forecasts or decisions.
This difference becomes even more pronounced when compared to a Fractional CFO that garners unique insight by working with numerous companies of all sizes and industries. This is important because variety gives the CFO exposure to a library of eclectic challenges and opportunities to develop unique solutions.
A Controller will not have this span of knowledge. They will only be familiar with the financial processes used by your company to produce reliable financials consistently. So, when trouble comes, a Controller’s experience and expertise will reflect on the decisions they propose. A CFO who has encountered the same problem in other companies will know how to swiftly handle it before it does any significant damage.
Both Controller and CFO play a role in keeping a company’s financial well-being. But the way they approach this task is where the difference lies.
A CFO takes the existing financial data and steers your company ship to its goal. He or she has the training and experience to help you stay aligned with your vision, even through economic challenges. Controllers, on the other hand, are responsible for documenting all the financial information in spreadsheets and reports to be used by the key decision-makers.
Promoting a Controller to a CFO without the right training can hinder your progress. It can make your company vulnerable to avoidable threats and exacerbate the consequences of inevitable financial problems—with no foolproof solution in sight to save you from it