The terms financial controller or CFO, though used interchangeably, have some differences. This is especially true for small companies who are low on budget to hire a financial controller and a CFO. There are many factors that have to be considered while deciding who the business needs; A Controller? A CFO? Or both?
Who is a Financial Controller?
A Financial controller is the head of the accounts department. The controller ensures that accounts and records are maintained as per the accounting standards and rules. A senior-level executive who ensures payments are made and received on time and complies with all legal and statutory obligations. A controller oversees all the financial tasks, including;
– Internal controls
– Solving audit queries
– Analysing company data
– Preparing the company’s financial statements
Who is A Chief Financial Officer (CFO)?
A CFO monitors and manages the finances of the entire company. The role of a CFO involves taking strategic financial decisions to ensure that the business operates smoothly. The controller, finance, and accounts department report to the CFO. It is the CFO’s responsibility to ensure that;
– All financial statements like Profit & Loss Account, Balance Sheets, cash-flow statements are accurately prepared showing the true and fair value of the company
– Monitoring the liquidity position of the company and its capacity to pay off its liabilities on a regular basis
– Helping companies to earn the highest Return in Investments (ROI)
– Providing expert opinion and taking decisions regarding investments
Financial Controller Vs CFO:
1. Role in the company:
The controller and the CFO work hand in hand when it comes to the financials of a company. The controller provides all the financial data and information to the CFO and the management as required in necessary formats and reports. A CFO uses the financial data provided by the controller to make strategic decisions on behalf of the entire company.
2. Duties performed:
The controller is the first-hand user of all the financial data and information. It is the controller’s duty to keep the books of accounts and records up-to-date and accurate. The CFO spends most of his time analyzing various reports and statements and is busy understanding the market scenarios. The CFO is usually busy with the heads of other divisions and deriving various methods for the company to obtain or invest their resources.
Since the controller maintains accounts and financial statements, his level of responsibility lies in ensuring that the accounts department records carefully all transactions and that the financial statements show a true and fair picture of the company’s position. A CFO holds greater responsibility than the controller. This is because his decisions affect the company as a whole and have a long-term impact on the company’s growth.
The controller’s expertise lies in providing various financial data to the management. The data and reports help them understand the liquidity position of the firm and take steps to raise funds from various available sources. A CFO, however, is actively involved in obtaining funds for the company’s varied needs. Thus, the CFO has much more expertise than the controller.
The controller’s role is of tactical nature while the CFO performs the role of a leader and carries on a strategic role and so the company pays the CFO higher than the controller.
A company should hire a financial controller in the following situations:
1. Streamlining the accounting process: A controller can easily use his/her expertise to take care of all your accounting activities and ensure that financials are prepared as per the required standards and procedures.
2. Audit support and internal control: A controller can easily take care of audit queries and ensure that all required internal controls are in place to prevent and detect frauds and errors.
3. Accuracy: A controller can ensure that all financial reports, statements, and transactions are recorded accurately. As the controller has expert knowledge of various accounting tools and software, he/she can fix any gaps in the accounting process and the system in use.
4. Accountability: As a company grows, the transactions keep increasing and so does the complexity of accounts. A controller keeps a check on all these points and takes ownership to ensure that the accounting is in place as the business grows.
A company should hire a CFO in the following situations:
1. Need expert advice on financial strategies: A CFO helps a company not only to raise funds and to make profitable investments but also provides expert advice about pricing strategies, mergers and acquisitions, and long-term financial planning. A company of any size would always invest in hiring a CFO who actively takes part in all strategic decisions.
2. Reporting to the Board and shareholders: A CFO is fully aware of the financial position of the company at any point in time. Hence, the CFO is expected to make presentations to the board and shareholders and explain to them how well the company is performing in terms of capital and ROI.
3. Support in fundraising and investments: A CFO is a financial expert who represents the company to various outsiders like bankers, investment bankers, and others whenever the company needs funds for working capital, growth plans, mergers & acquisitions, etc.
Every company needs a financial expert who is readily available to provide the best decision in the company’s favor. Depending on the size, nature, and scale of business operations, a company can hire a controller, a CFO, or sometimes both. However, not all firms have the required number of resources to hire experts of high caliber and also pay them huge remuneration. At such times, it is best to hire an outsourcing firm that provides the services of controller and CFO based on the client’s requirements.
If you think that your company needs someone who can take care of your finances and also supervise your accounting team, then Diligen has a wide range of solutions to suit your needs. Diligen has its own set of in-house financial professionals who can help you make the best of your financial situation. Using Diligen’s VCFO services saves you the time and money of going through the hiring process. Diligen has a pool of experienced professionals, thus the clients are assured to get the best advice not just from one professional but from a handful of experts. Diligen provides flexible solutions that can be customized easily to meet your business needs; clients always have the freedom to up-scale or downscale depending entirely on their company needs from time to time.