The Difference Between CFOs and Controllers: Roles, Responsibilities, and Who to Hire for Your Small Business

CFOs and controllers are senior accounting roles that drive a business’ finance function. In 2024 the finance function has climbed up to becoming one the most relevant parts of a business. Interest rates are soaring through the roof, and the economy seems primed for an inevitable upset. If businesses are not prepared, they may face catastrophic damage should the worst occur.

It falls to the brave CFOs and Controllers out there to fortify the defenses in the face of the coming storm. Much like doctors were our first line of defense against the pandemic, accountants and economists will play a pivotal role in shaping the global business landscape in the months to come.

Whether you own a small business or are head of a corporate empire, you need capable CFOs and controllers by your side to withstand the financial turmoil. It is not a question of yes or no; you must get your finances sorted and prepare for the worst-case scenario.

Many startups and small businesses are still chugging along without established professionals as the financial backbone. This needs to change, and change starts with awareness. Today, we pen this article to discuss the vital roles of CFOs and Controllers and why every business owner needs either or both depending on their goals. 

Controller vs CFO: Understanding the Roles

Controller: The Financial Rook

If business were like chess, then the controller would be the rook, the guardian and shield of the kingdom. A controller’s job is to oversee and control the day-to-day accounting operations in a business. At the end of every working day, it is the controller’s job to review all accounting done and ensure everything is accurately recorded and executed. They “guard” the business from financial mistakes and internal threats, thus being the shield of the business.

In the controller role, accountants oscillate between middle management, quality assurance, and accounting. Some of the major responsibilities associated with the role include:

Complete Financial Oversight

In a fully-staffed accounting function, the controller oversees all of the day’s accounting activities. They carefully examine and compile the data within the books of accounts and generate financial statements and reports. Every transaction must be vetted and double-checked. Every entry in the books must be accounted for. If cash has come in or out, ascertaining its whereabouts falls to the controller.

Internal Fraud Prevention

Controllers are the first line of defense against internal financial fraud and embezzlement. If anybody in the accounting function is siphoning funds off, it’s the controller’s responsibility to follow the paper trail and stop the fraud in its tracks.

Audit Management

When an audit occurs, the controller is typically in charge of gathering and supplying the required documentation. They compile all financial statements, reports, and filings needed and coordinate with auditors to ensure smooth sailing.

Controllers are detail-oriented and highly skilled in accounting principles. Their focus is on the accuracy of financial data and adherence to regulatory requirements.

CFO: The Business Bishop

Carrying the chess metaphor along, a CFO is akin to the bishop on the chess board. A strategist who dictates the flow of the game. In an organization, the CFOs role is in a decision-making and planning capacity. While a CFO is a highly accomplished accounting professional, their role primarily concerns how accounting and finance can be used in the business’ favor.

As CFOs, accountants are expected to play a leadership role in the accounting function while taking an advisory role in the boardroom. They are the king of the financial ship while serving as viziers to the organization as a whole. Some of the main responsibilities they take up include:

Financial Planning and Strategizing

When a financial matter arises in the boardroom, the CEO turns to the CFO. Their job is contributing to business strategy and planning from the accounting angle. Any and every monetary question falls to the CFO to answer. The CFO aligns the company’s goals with its financial interests. They guide decision-making toward bettering the business financially or, at the very least, protecting it from any risky or unwise choices.

Investor Relation Management

The CFO is directly answerable to investors and is in charge of investor relations management. Investors are interested in the business’ financial future, and the CFO is best equipped to explain the business’ financial strategy and plans. They are also responsible for maintaining good relations between the business and stakeholders. In a sense, they are the business’ ambassadors and manage the business’ PR among investor groups and the more exclusive business community. 

Capital Structure

CFOs plan and manage how the business’ capital structure will look. They decide how debt will be handled and oversee any and all equity financing. They are also responsible for monitoring and controlling the business’ share prices in public companies. A CFO’s decisions can make the difference between shares skyrocketing or plummeting

4 Key Differences Between CFOs and Controllers

While both CFOs and controllers play crucial roles in driving the business’ accounting function, their roles are distinct and well-distinguished. CFOs and controllers complement each other and together are your best chance at thwarting the coming economic storm. Let’s look at some of the primary distinguishing factors between the two to understand their place in the business better: 

1- Scope of Responsibilities

• Controller: Focuses on internal financial operations, ensuring accurate record-keeping and compliance.
• CFO: Involves strategic planning, financial forecasting, and external financial relationships.

2- Skills and Expertise

• Controller: Requires strong accounting skills, attention to detail, and knowledge of regulatory standards.
• CFO: Needs expertise in strategic thinking, risk management, and financial markets and investments.

3- Organizational Hierarchy

• Controller: Typically reports to the CFO or directly to the CEO in smaller companies.
• CFO: Reports directly to the CEO and often sits on the executive board.

4- Professional Focus

• Controller: Concentrates on the past and present financial condition through accurate reporting.
• CFO: Looks toward the future, planning and strategizing for financial growth and stability.

When Should You Hire a CFO or Controller for Business?

When to Hire a Controller

Hiring a Controller is often the first step for growing businesses that need to ensure their financial operations are running smoothly. Here are some indicators that your business might need a Controller:

• Increasing Transaction Volume: If your business is experiencing growth, the volume of financial transactions will increase, necessitating accurate and timely financial reporting.
• Regulatory Compliance Needs: As your business expands, so do the complexities of regulatory compliance. A Controller ensures all financial activities comply with laws and regulations.
• Audit Requirements: If your company is preparing for an audit, having a Controller to manage and coordinate the process is invaluable.
• Budget Management: To maintain control over expenses and improve financial planning, a Controller can provide the detailed oversight needed.

When to Hire a CFO

A CFO is typically hired when a company reaches a certain level of maturity and needs strategic financial leadership. Here are signs that your business might benefit from a CFO:

• Strategic Financial Planning: A CFO’s expertise is essential if your company needs long-term financial strategies and planning to support growth.
• Capital Raising Needs: For businesses looking to raise capital, whether through debt or equity, a CFO can navigate these complex processes.
• Risk Management: As businesses grow, so do the risks. A CFO helps identify and mitigate financial risks, protecting the company’s assets.
• Investor Relations: A CFO manages critical relationships and can help your business deal with investors or prepare to go public.

Combining the Controller and CFO Roles

In some businesses, especially smaller ones, the roles of Controller and CFO may overlap, or one person may fulfill both roles. However, as businesses scale, the need for distinct individuals in these roles becomes apparent due to the specialized skills each position requires.

Small businesses typically do not have the workload to justify hiring a CFO but instead can hire a fractional CFO. A fractional CFO is a remote professional who can be hired to perform CFO duties when needed. They work on a temporary contractual basis through accounting and bookkeeping service providers. The same service providers can connect business owners with controllers who can come in during important procedures like audits to ease the burden.

Conclusion

Understanding the differences between a Controller and a CFO is crucial for making the right hiring decision. Controllers are essential for accurate financial reporting and compliance, focusing on the internal financial health of the company. CFOs, on the other hand, provide strategic financial leadership, guiding the company’s financial direction and growth.

For businesses experiencing growth and increased financial complexity, hiring a Controller can ensure accurate financial operations and regulatory compliance. A CFO is indispensable for companies needing strategic financial planning, risk management, and capital raising.

Ultimately, hiring CFOs and Controllers depends on your business’s current needs and goals. By evaluating your company’s financial requirements and growth trajectory, you can make an informed decision in the best interest of your company.