A controller oversees the accounting department to ensure financial statements are accurate. The CFO takes these financial statements and formulates a strategy to meet business goals. A controller has a solid understanding of accounting principles, whereas a CFO can also analyze current performance to predict future outcomes of the business.
Businesses typically hire a controller when they have a number of employees doing day-to-day accounting work but want someone who can manage all aspects of recording transactions. Once you need someone to help you think more strategically about your business, it’s time to hire a chief financial officer (CFO).
However, when you are first starting out, it makes sense to hire a bookkeeper or consider hiring a bookkeeping services firm. We recommend Bench to small business owners who are looking for a company that can manage their day-to-day income and expenses. Contact Bench for a free consultation and they will create one month of financial statements for you, free of charge.
What Is a Controller?
A controller is responsible for all aspects of accounting. This includes accounts payable, accounts receivable, inventory, payroll, and fixed asset management. The controller focuses on accurately reporting the historical performance of a company. This is done by ensuring financial statements are accurate, complete, and in compliance with Generally Accepted Accounting Principles (GAAP). If the controller is not also performing the duties of a CFO, they most likely report to the CFO if there is one.
Some of the key responsibilities of a controller are:
- Manages the accounting department: Manages all areas and personnel in the accounting department. This includes accounts payable (A/P), accounts receivable (A/R), inventory, payroll, and fixed assets.
- Manages accounting IT functions: The IT department may report to the controller for anything that has to do with the accounting software and payroll systems. Because the controller is in charge of fixed assets, they typically manage company resources such as laptops, printers, and other similar assets.
- Manages human resources department: The human resources (HR) department generally supplies the accounting department with the employee benefits information required to properly calculate payroll checks. As a result, HR often reports to the controller specifically for payroll-related matters.
- Ensures sales tax compliance and prepares reporting: Staying on top of sales tax rates to ensure the company charges and collects the appropriate sales tax amount. Completing sales tax returns and submitting payments is also part of the controller’s responsibility.
- Ensures income tax compliance and prepares reporting: Depending on the size of the company, controllers may be responsible for completing and filing income tax returns. Larger organizations typically hire outside certified public accountant (CPA) firms for this. If so, it is the responsibility of the controller to supply the financial statements required to complete the tax returns.
- Oversees audits: The controller oversees routine audits initiated by an outside CPA firm or the IRS as well as those initiated by state and local payroll and sales tax entities.
As you can see, the controller is responsible for every aspect of a company that impacts the financial statements. This includes managing the accounting, payroll, human resources (as it relates to employee payroll), and IT staff (as it relates to fixed assets). The controller’s sole job is to supply reliable financial statements that accurately depict the historical performance of a company. Once this is complete, the CFO takes this information and uses it to predict a company’s future performance.
What Is a CFO?
A CFO is responsible for the financial and operational aspects of a company. The CFO must have a good understanding of the company’s business operations. Once a CFO understands how all aspects of the business work, they can take the historical data from the financial statements and turn it into operational metrics of past performance to help drive future decisions.
Some of the key responsibilities of a CFO are:
- Oversees the controller: The CFO is responsible for the financial records, which is why the controller reports to this position. The controller partners with the CFO to ensure the financial statements are 100% accurate and complete.
- Planning and future performance: Creates and executes on an overall strategy for the company to achieve its goals.
- Process improvement: Analyzes processes company-wide to ensure efficiency in every area.
- Interprets the data: Tells the story behind the numbers so that other members on the senior leadership team understand how past performance will impact running and promoting the business in the future.
- Advises the CEO: Informs the chief executive officer (CEO) of any “red flags” or areas of concern, such as being too asset heavy or long-term funding issues that may arise if the company is looking to grow and expand.
- Identifies critical issues: By staying on top of all financial and operational aspects of a business, the CFO is able to identify issues early on. Once identified, the CFO informs the rest of the senior leadership team and is responsible for implementing a mitigation plan to reduce any risk.
Depending on the size of the company, a CFO could also serve as the controller. If you don’t have the budget to hire both a CFO and a controller, this might be an ideal solution. A CFO has the knowledge and expertise to manage the day-to-day accounting of the business.
When It’s Right to Hire Only a Controller or a CFO
Small companies generally hire a controller well before they hire a CFO. As the company grows, this person will take on the functions of CFO in addition to wearing the controller hat. Or, they will take on the day-to-day accounting functions and an external CPA will take on the CFO functions.
Rapid company growth is one reason you should consider hiring a controller. For example, if you are adding new locations or new product lines to your business, a controller can advise you on these decisions. The controller can review the current financial performance of the business with you and help determine what the impact of adding a new office or business segment will be.
Unlike a controller whose job is to report on a company’s past performance, the CFO’s job is to focus on the future. By having a clear understanding of business operations and finances, the CFO can create a strategic plan to support the future goals of a company.
When It’s Right to Hire Both a Controller & CFO
As discussed, your controller may also act as a CFO in the early stages of your business growth. However, if your business continues to grow at a rapid pace, the controller is going to have less time to spend on assisting with strategic decisions because their first priority is to produce accurate and reliable financial statements.
If you can’t afford to hire a full-time CFO, hire a virtual CFO. Virtual CFOs are a fraction of the cost ($36,000 per year) versus $130,872 per year for a full-time CFO. The annual cost of $36,000 is assuming you need monthly consultation, which averages about $3,000. If you don’t need a monthly consultation, then it will be a lot less. These folks tend to have a roster of clients, which means they have experience working with clients in several different industries.
How a CFO & Controller Are Different
There are a number of differences between a CFO and controller. Cost, the role each plays in an organization, the duties carried out, and their work experience are four areas where there are key differences. The role of a controller is more tactical, whereas a CFO’s role is more strategic. For example, a controller manages the day-to-day accounting versus a CFO who analyzes the financial statements to predict future performance.
Controller vs CFO: Differences in Cost, Role, Duties & Work Experience
|Average Annual Cost||$81,627*||$130,872**|
*Figures taken from a study completed by PayScale on controller salaries
**Figures taken from a study completed by PayScale on CFO salaries
Controller vs CFO: Cost
On average, the cost of hiring a full-time CFO ($130,872 per year) is more than 1.5 times what you would pay to hire a full-time controller ($81,627 per year). It costs more to hire a CFO because they have a lot more responsibility than a controller does. In addition to overseeing accounting, the CFO is also responsible for making sure that the overall strategic growth plan of the organization is carried out by all segments of the business.
What a Controller Costs
Based on a study by PayScale, the national average salary for a controller is $81,627 per year. This estimate is based on salaries submitted anonymously to PayScale by small and large businesses. Keep in mind that a number of factors, such as geographical location, industry, education, and years of experience, can impact what a controller costs. In addition to the base salary, additional compensation such as cash bonuses, commission, and profit sharing average about $20,000 per year or more.
What a CFO Costs
According to a study by PayScale, the average CFO salary in the United States is $130,872 per year. Similar to controllers, these costs will vary based on geographical location, experience, and education. On top of the base salary, CFOs also receive additional compensation in the form of bonuses and profit sharing, which average $40,000 per year or more.
Controller vs CFO: Duties
The differences between CFO and controller can be described as tactical versus strategic. The controller’s duties consist of managing the activities and people responsible for the day-to-day bookkeeping, while also producing accurate and reliable financial statements at the end of the reporting period. The CFO’s job is to use financial statements to predict the business’ future performance and create a strategic growth plan.
A comparison of the duties of a controller versus CFO are:
Controller vs CFO Duties Comparison
|Controller Duties||CFO Duties|
|Oversee accounting department||Oversees financial and operational side of the business|
|Ensures the accuracy of financial statements||Drives overall budgeting and planning process|
|Responsible for tax reporting and compliance||Develops and implements overall strategy for company|
|Oversee routine audits||Advises CEO and the rest of the Senior Management team|
|Manages aspects of IT and HR departments||Identifies areas of risk and creates a mitigation plan|
What a Controller Does
A controller oversees the accounting department to ensure a company’s financial transactions are properly recorded. This includes managing the roles and responsibilities of the accounting personnel and certain aspects of the HR department as it relates to payroll, and of the IT department as it relates to the accounting and payroll systems. Overseeing audits and tax reporting and compliance are also the controller’s responsibility.
Some of the day-to-day activities the controller will oversee are managing accounts payable and accounts receivable, ensuring that payroll processing deadlines are met, and that all payroll tax return filings and payments are made on time. In addition, the controller tracks inventory quantity and costs to ensure inventory is recorded properly.
What a CFO Does
A CFO works closely with the controller to produce good and reliable financial statements. The CFO takes the financial information and shares it with stakeholders, such as the owner and the senior leadership team. Based on the financial information, the CFO creates a strategy for the company in order to meet the overall goals for the business. In order to do this effectively, the CFO must have a solid understanding of the day-to-day business operations and the impact to the financials.
The activities the CFO will manage include analyzing the financial statements to see how each business segment is performing, meeting with operations managers to learn more about issues they may have in their respective areas and working with them to find a solution, and working closely with the controller to ensure all local, state, and federal reporting requirements are met.
Controller vs CFO: Work Experience
The ideal controller candidate is an accounting manager or assistant controller with an excellent track record who has been with the company for five or more years and has an excellent track record. In contrast, a CFO should come from outside your business because you need someone who can bring a fresh perspective to the business. The CFO should also have an excellent track record of helping other businesses to be successful.
Work experience that controller and CFO candidates should have are:
Controller Work Experience
In general, a controller role is filled by an internal accounting professional, such as an accounting manager, who has been in their role for over five years. Accounting managers often do the work of a controller, so it makes sense to promote them to the role. Depending on the company, they may need a CPA license. However, stellar performance in previous positions may be enough to secure the role.
CFO Work Experience
The work experience you should look for in a CFO candidate is quite different from a controller. In addition to having accounting knowledge and a financial or banking background, they should have five or more years of experience in the CFO role.
Depending on the needs of your business, you could choose to hire someone who has a lot of experience with other companies within your industry. The benefit of this would be that they would have a good understanding of your industry’s financial drivers. On the other hand, if you’re looking for more of a fresh perspective, hire someone who has experience working for a variety of companies in different industries.
Controller vs CFO: How to Hire
While the skill set and type of experience differ for a controller versus CFO, both should have at least five years of experience. The controller should have a solid background in accounting and the CFO should have a good understanding of accounting plus a finance or banking background. Both positions also require someone who has experience with managing people.
Below we have included tips on how to hire a controller and a CFO:
How to Hire a Controller
As with hiring for any position, make sure you create a detailed job description. To find good, quality candidates, ask for referrals from an outside CPA firm. You should also check out the Financial Executives Networking Group, which is a great place to find candidates for any financial executive role.
It’s also important to assess your existing talent to see if you have someone who possesses the skills required for a controller. The ideal candidate might be the accounting manager or assistant controller on staff. The best part about hiring internally is you have firsthand knowledge of their past performance. Whether you decide to hire internally or externally, the qualities a controller should possess are a knack for numbers, excellent communication skills, and the ability to lead and motivate a staff.
How to Hire a CFO
Similar to hiring for a controller, you need to create a detailed job description and ask for referrals from local CPA firms. However, the CFO role may also require a bit more vetting than the controller role. You may want to consider hiring an executive search firm to locate good, quality candidates.
While you may have a controller who is performing the duties of both a CFO and controller, I don’t recommend you promote a controller to CFO. The skill set required of a CFO is quite different from that of a controller. Unfortunately, not many controllers are able to make a successful transition to a full-time CFO role—not to mention that internal personnel may not be capable of bringing the fresh perspective that you need in order to take the business to the next level.
If you decide to go with a virtual CFO, the same rules should apply. However, unlike an internal hire, you will have to determine how often you will need this person’s counsel (e.g., weekly, monthly, or quarterly) and be sure to set that expectation during the interview.
Benefits of Hiring a Controller vs CFO
You can’t go wrong by hiring a controller, a CFO, or both positions. Hiring a controller will give you confidence that your financial statements are accurate. A controller will also ensure segregation of roles and responsibilities to minimize fraud. The CFO is the person who will ask you where you see your business in the next five to ten years and formulate a strategy to get you there.
The benefits of hiring a controller versus CFO are:
Benefits of Hiring a Controller
There are many benefits of hiring a controller. A controller will supply you with accurate financial statements that you can provide to stakeholders and financial institutions. They ensure internal controls between jobs and employees are adhered to. They can help to minimize your tax liability by ensuring that all expenses are recorded properly.
Three benefits of hiring a controller for your company are:
- Having accurate and reliable financial statements: Up-to-date financial statements allow the company to supply financial institutions with the information they need to apply for a business loan. Potential investors typically review the financials before deciding to invest in a company.
- Minimizing risk of fraud: The controller ensures internal controls are in place and establishes separate duties between roles to minimize fraud. For example, you don’t want the person who is responsible for setting up vendors to also be the one writing checks. That creates a risk for that person to create a fake vendor and paying himself or herself.
- Saving money on taxes: By ensuring that all company expenses have been recorded, you can be sure that you get all of the tax deductions you may qualify for, which can reduce, if not eliminate, your tax bill.
Hiring a controller will give you the insight that you need into how well your business is performing through detailed financial statements. With the proper controls in place, the risk of fraud will be reduced and you can ensure all of your expenses are accounted for, which will allow you to maximize tax deductions you may qualify for.
Benefits of Hiring a CFO
A CFO gives you confidence in your finances and is someone who can help bring your vision of growing your company to fruition. Three key benefits of hiring a CFO are an improved bottom line, rapid business growth, and better control over cash.
Three benefits of hiring a CFO for your company are:
- Improved bottom line: A CFO will review key areas of the business to ensure that inefficiencies are reduced, if not eliminated altogether. Improvement in areas such as purchasing, sales, operations, and accounting will all contribute to increased profits.
- Rapid business growth: The primary role of a CFO is to implement a strategy for the future of a business. The CFO will hold key management to the assumptions made during the budgeting process; if the numbers are falling short, partner with sales and operations to come up with a plan to get back on track or change course.
- Better control over cash flow: The CFO works closely with the controller to stay on top of cash flow. Based on trends and past performance, the CFO creates a plan to ensure there is enough cash to meet the business’ obligations. If there is an unexpected cash shortage, the CFO works with the bank to find funding options to cover any shortfalls.
You can’t go wrong with hiring a CFO for your business. Their ability to improve profits, create a strategy that supports exponential growth, and gain a handle on cash flow are all key ingredients that will take your business to the next level.
Controller vs CFO Frequently Asked Questions (FAQs)
In this section, we have included answers to the most frequently asked questions about controller versus CFO. If you don’t see your question, visit the Fit Small Business forum and post your question there. An industry expert like myself will respond to your question.
The most frequently asked questions about controller versus CFO are:
What is the difference between an accounting manager & a controller?
The accounting manager oversees the accounting personnel who are responsible for recording all financial transactions for a business. The controller reviews the financial statements to ensure all adjustments are made prior to closing the books. The controller works closely with the outside CPA firm to provide the information required to complete an income tax return.
Is a controller an officer?
A controller might be an officer of a company, but it depends on how the company is structured. If the company has a CFO or chief accounting officer (CAO) on staff, most likely no. However, if the controller is serving as the CFO or CAO, then it is likely that they are an officer.
What is the role of CFO in a company?
The role of the CFO is to help a business reach its full growth potential. Analyzing past performance and creating key performance indicators (KPIs) to predict future performance are key inputs in the overall strategy the CFO will create. Throughout the year, the CFO will monitor the progress to ensure the overall goals of the business are met.
At this point, you should have a better understanding of the key differences between a CFO and a controller. As discussed, a controller will produce complete financial statements at the end of the accounting period. A CFO will partner with you to create a strategy to grow your business. If you’re having trouble staying on top of invoicing customers or paying bills, you’re not quite ready to hire a controller or CFO. Instead, you should leave the bookkeeping to the experts.
Bench is a full-service bookkeeping company that caters to small businesses. Bench will track all of your income and expenses for you and provide monthly financial statements. This will allow you to stay on top of how your business is doing. Head over to the Bench website to request your free consultation.