For your small business to operate at a high level, you need to have clearly defined roles in your finance department.
Ideally, this means that you’ll have a position for different responsibilities. However, not every small business has the funds to hire a bookkeeper, controller, and CFO.
That’s why it seems like so many small businesses have bookkeepers that are handling duties outside of their regular job description and an owner without proper financial training overseeing everything else. This situation is far from ideal.
If this sounds like your business, you probably need some help. But do you need a CFO or a controller? These two titles are often confused by small business owners.
That’s because some of the responsibilities for each position seemingly blend.
As your small business scales, you’ll eventually want a CFO and controller. But for now, you can probably get away with hiring just one.
In this guide, I’ll explain the different roles of a CFO and a controller so you can decide which position is best for your small business right now. You can also use this information to plan.
Responsibilities of a Small Business Controller
Controllers are considered mid-level management in the financial department. It’s their responsibility to supervise your bookkeeper.
While it’s the job of a bookkeeper to record transactions and create financial reports, the controller will take on the responsibility of reviewing those reports.
First and foremost, they’ll be checking for quality assurance. The controller ensures that financial reporting is accurate.
Your controller will also work with your bookkeeper to prepare monthly and yearly reports. But they will also analyze those reports to help with cash flow management and budgeting.
Controllers handle compliance and make sure that everything is up to GAAP standards.
The controller will also be responsible for choosing how your accounting department operates. This means that they will have say in the accounting software used by your small business.
Your controller is involved with tactical planning. They are responsible for knowing the current state of the accounting department and its functions.
Responsibilities of a Small Business CFO
A CFO holds an executive level position in your business.
It’s their responsibility to focus more on big-picture aspects of the company as opposed to day-to-day bookkeeping.
Your CFO will provide a more in-depth analysis of the current and future financial position of your small business. This analysis goes beyond what a controller would do.
CFOs identify problems and provide solutions for them as well. They’ll also establish your bookkeeping KPIs. This is a key position for strategic planning.
Your CFO will represent your small business when dealing with people outside of the company, such as banks, VCs, insurance companies, or auditors.
When to Hire a Controller
The size of your company matters if you’re considering a controller.
Typically, controllers are employed by medium-sized businesses, as opposed to smaller companies or startups.
If your company needs more supervision over your bookkeeper to ensure accurate reporting, a controller can help you with that. For those of you who are struggling to keep your financial records up to date, hiring a controller can help you record information in real-time. This will make it easier for you to make crucial financial decisions for your small business.
A controller will also assist with setting goals and objectives based on your reports.
So, if your business doesn’t currently have a great sense of direction, a controller can assist with those needs.
Controllers are best for small businesses that are growing at a rapid rate. As you find yourself with more employees to manage, a controller can help your operation run more efficiently in the finance department.
When to Hire a CFO
Your small business needs a CFO if you’re struggling with long-term cash flow management.
If you’re faced with problems in your financial department, a qualified CFO can come in and offer solutions.
CFOs are great for those of you who need to raise money, whether it be from banks, VCs, investors, or other lenders.
Do you want to sell your company? Do you want to buy out a competitor? CFOs can guide you through acquisitions and mergers.
If your company is audited on a regular basis, you’ll want a CFO available to ensure that everything is prepared properly. They’ll also represent the company during an audit, so it’s one less thing that you’ll be responsible for as an owner.
CFOs are leaders.
So, if your financial department is in disarray and needs more structure, a CFO can come in and clean things up for you. If you think a CFO is best for your company, and you’re ready to move forward, check out my guide on how to hire a part-time CFO.
In a perfect world, your small business will have a CFO and a controller.
But since both are high paying positions, it may not be realistic for most of you to hire both right now.
Rather than being forced to choose between the two, there’s an alternative solution that’s cost-effective as well. Look for an outsourced CFO service to handle all of this for you.
Instead of hiring two full-time in-house employees, an outsourced CFO service will give you all of the resources and expertise you need at a fraction of the price.