What is the Difference Between a Controller and CFO?

One of the questions we get asked most frequently about financial roles and responsibilities is “What is the difference between a Controller and a CFO? These titles are used frequently–and often interchangeably–in the business world. However, despite the roles seeming colloquially familiar, in reality these two finance professionals have vastly different skills and qualifications.

Understanding the difference between a controller and CFO empowers owners to make strategic hires while benefiting from the full potential of these two experts. tWhile there are functions of both a controller and CFO that support each other, both positions make distinctly different contributions to the organization.

What is the Difference Between a Controller and a CFO?

The biggest difference between a controller and a CFO is that a controller manages and measures historical financials while a CFO strategizes and executes a forward-looking financial strategy. A controller’s main duties include organizing your existing books, keeping them in order, and providing timely and accurate financial reporting and analysis. Conversely, a CFO provides high-level strategy to improve profitability, accelerate growth, maximize assets, minimize inefficient activities and spend, and increase shareholder value.

A controller will provide a clear and accurate view of where the company has been. A CFO will look at where the company is, where it wants to go, and strategize exactly how the organization can meet or exceed those goals in the most timely way possible and with the least amount of wasted time and money.

Controllers vs. CFOs

The difference between a controller and CFO is not only their job roles, but also their depth and breadth of experience. A controller usually has strong bookkeeping or even CPA experience. (Read about the difference between a CPA and a CFO here). Their expertise is very technical and less operational in nature. They help ensure financial statements are complete, accurate, and presented within GAAP standards. This means they have a strong historical background.

Controllers are essential to companies because they help to accurately report historical performance, as well as leading audits. This is crucial for companies for developing budgets, projections, and future analysis. This is imperative to a company as it is the basis for strategic decisions–it would be detrimental to base business decisions on inaccurate data.

The Controller helps to support a CFO by providing the numbers that the CFO can use to drive action and strategy.

A CFO not only has historical financial expertise, they also have years (or even decades) of high-level strategy and operational experience. This means they have the ability to provide high-level financial strategy to move the needle in terms of growth, profitability, and shareholder value. They manage processes to ensure efficiency and turn a CEO’s vision and goals into the financial modeling to actuate this vision. They will optimize a company’s current assets to maximize profitability, can help streamline the process for capital raises or transactions, provide key relationships and management for connections such as vendors or lenders, provide risk analysis and mitigation, and create and analyze potential opportunities, creating a clear vision forward.

Functions of a CFO

A CFO is operational in nature, taking the financial reports provided by the Controller and turning it into actionable strategies to drive success.

• Accelerate stagnated growth or sustain high growth
• Analyzing numbers to improve future performance
• Optimizing operations for maximum efficiency
• Short- and long-term forecasting to achieve goals
• Optimize vendor relationships & contracts for improved terms and cash flow
• Optimizing cash flow & minimizing wasted spend
• Measuring & maximizing profitability
• Increasing shareholder value
• Facilitating debt & equity fundraising
• Predicting & mitigating financial risk
• Establishing policies and procedures to optimize business performance
• Manage and & strengthen shareholder relationships
• Provide strategic relationships with lenders, investors, vendors, and more
• Prepare for transactions such as capital raises, mergers, acquisitions, or strategic exits

How to Know Whether You Need a Controller or CFO

Knowing whether you need a controller or CFO depends on your needs. You may need a controller if your books are late or inaccurate, if you need additional assistance interpreting reports, or if your financial team lacks experience. However, if your company is in needed of elevated financial strategy to sustain high growth, push through a growth plateau, overcome a financial challenge, or prepare for a transaction, then you most likely need a CFO.

Many companies see building their financial team as a hierarchical process. They hire a bookkeeper and accountant first, then controller to manage them, and then a CPA for tax strategy, and finally a CFO. However, this is not always the most strategic way to manage your company’s finances. Instead, you should look at your company’s needs, the capabilities of your existing team, and your goals.

Often, a bookkeeper and accountant can perform similar duties, depending on their level of expertise. Low-level bookkeepers may be best at processing transactions, payroll, and AR/AP, while accountants prepare financial statements, close out at the end of the month, and perform reconciliations. This, at a part-time or full-time level, is a standard need for most companies.

Because of the differences between a controller and a CFO, the next hire is contingent on your company’s goals. If your historical financials are complicated and need extra management to oversee them, then you may be in need of a financial controller. If your goals and needs are based on growth, pivots, transactions, or if your company is currently facing financial challenges, then you are most likely in need of a CFO. However, unless your company or needs are large enough to merit a full-time CFO (usually $30-40M+ in annual revenue and 150-250+ employees), you may be better off hiring an outsourced, fractional CFO. This gives you the high level of financial strategy your company needs, but without the in-house salary, bonuses, and benefits that come with a full-time hire.

As a separate consideration, if what you really need is tax strategy–minimizing tax burden, keeping records, and filing taxes, then you may actually be in need of a CPA.

3 Signs You May Need a Financial Controller

If you’re still not sure whether you need a controller or CFO, consider the points below.

1. You Don’t Have Financial Information/Reports You Need When You Need Them.

Controllers are responsible for providing timely financial information and reports so you can make intelligent, information-based business decisions. Since all major business decisions are contingent on numbers, it’s important to have someone around who can answer those questions quickly and provide you relevant financial reports and information when you need it.

2. Your Financial Reports are Behind or Inaccurate.

If you haven’t been operating your organization or making business decisions with up-to-date financial information, then you’re not running your organization as efficiently as you could be. A powerful change you can make in your organization is enlisting a full- or part-time controller who can provide accurate reports within 15 days of month-end. This helps you make more strategic and intelligent business decisions while keeping a steady pulse on the health of your organization.

3. Your Spending or Accounts Receivable/Payable are Out of Control

If you’re not confident that your team is on top of billing customers, collecting and applying client payments, paying invoices, or keeping records updated, then it’s time to add a full- or part-time controller to your organization. A controller will clean up your current financial records and make sure processes moving forward are streamlined according to your current needs.

If you have regular cash flow issues, however, you may want to consider a consulting CFO.

3 Signs You May Need a CFO

If your company is in need of elevated financial strategy, you may be in need of a CFO. Here are some signs you should consider:

1. You’re Raising Capital or Preparing for Another Transaction

If your company is preparing to raise capital, pursue a merger or acquisition, or planning for a strategic exit within the next 5 years, it’s time to hire an outsourced CFO. A CFO will ensure your finances are in a position to support a transaction. They will also provide the analysis and experience to determine whether the transaction you’re pursuing is the most beneficial for your company and your shareholders. In addition, the CFO can help with preparing the documents needed to pursue the transaction, will assist in due diligence, negotiate as needed, and help review the final documents.

Having a CFO at the table also helps to validate your company. It may also open up the possibility of valuable introductions and contacts as most CFOs have raised capital or participated in other significant transactions for many organizations over several years.

2. Margins are Tight or You Have Consistent Cash Flow Problems

How efficiently is your company running right now? If your margins are tight, it could be a sign your company isn’t working at its peak performance. A part-time CFO will dig into your numbers and your existing systems and figure out where improvements can be made. Are there materials or services that could be purchased more inexpensively by renegotiating contracts or considering other vendor relationships? Or are there terms that could be changed to improve cash flow? Are materials being wasted in any part of the organization or are you focusing on products or services that are less profitable or unprofitable for your business? Are there inventory adjustments to be made? Departments that seem to be spending too much or too little? Systems that could be changed or optimized? Are your prices too high or too low?

A CFO brings with him or her years of experience in organizations just like your own, which means they’ve seen and solved challenges similar to those your organization faces. Having their experience and insight on your team can elevate your systems, processes, and strategy more than almost any other single hire has the power to do.

3. You Need to Improve Your Financial Strategy

A full- or part-time CFO brings a level of strategy, insight, and execution for which small or inexperienced financial teams may not be qualified. CFOs have a wide range of industry, operations, and corporate finance experience. They focus on future cash flow more than historical data, and are experts in long-range operational planning and making sure every arm of the company is performing sustainably at peak performance.

One of a CFO’s most important tools is the long-term forecast. A financial forecast goes down to the detail to determine where money should be spent, where money should be coming from, and when. This forecast will guide budgeting, fundraising, sales, marketing, purchasing, and operations.

The Difference Between a CFO and a Controller – Final Thoughts

While a controller can be essential to keeping your current records organized and preparing timely and accurate reports, a CFO is your secret weapon for growth. With their tools, relationships, and expertise, your company gains insider knowledge from someone who has already helped dozens of companies just like your own succeed. They are the architect who takes your dreams and shows you exactly how to build them; they help you know who and what you need to get the job done in the most efficient ways possible, and help guide the implementation from start to finish.

How Can We Help?

Preferred CFO is regarded as one of the most experienced outsourced CFO firms in the United States. Our full-service fractional financial team includes bookkeepers, controllers, and CFOs. To learn more about how Preferred CFO can help elevate your financial strategy and create real, measurable difference in your business, contact Preferred CFO today.

About the Author

Tom Barrett is a skilled CFO with extensive experience. His financial expertise is key to helping companies with strategic financial planning, data analysis, risk assessment, budgeting, forecasting, cash flow management, and much more.

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