When a small Denver business starts out it is not uncommon for the executive team to take on more than one area of responsibility. For some, this means a certain function may be managed by an individual who is not an expert in that field. For example, the COO may also take on duties in the accounting department. Although the approach can help through the formative years, it is not an ideal arrangement as compliance, tax, and other issues become more sophisticated. At this point, organizations should consider adding a Controller, Chief Financial Officer, or both. While these roles can be filled by hiring, it is common for many to take advantage of Virtual CFO or Controller services. To help clients, prospects, and others, Hanson & Co has summarized the key considerations below.

What is a Controller?

This role oversees the accounting department, tax compliance, budgeting/forecasting, and financial reporting. It is a senior-level management position typically held by those with multiple years of experience in accounting and tax management. In smaller companies, the Controller assumes various duties, including budgeting, reporting, and compliance. The role is more specialized in larger companies as other responsibilities are shifted to the CFO.

What is a CFO?

This role is responsible for managing a company’s financial actions. It is an executive-level position held by individuals with significant experience, advanced degrees, and certifications. CFOs are responsible for financial planning, financial reporting, strategic management, asset management, and personnel management over financial functions. The CFO typically reports to the CEO and is the second or third-highest member of the C-Suite team.

Differences between a CFO and a Controller

In some businesses, a controller may wear so many hats that their role is not markedly different from a CFO. However, there may also be businesses where a controller reports to a CFO. Here are some of the subtle variations between CFOs and controllers based on the stage of the business, typical roles and responsibilities, and how each is positioned.

Stage of the Business

Bringing in a CFO, whether part-time or full-time, won’t make sense in the early stages of an enterprise’s development. Sources vary on the dollar amount, but a good rule of thumb is that a company should be making well over $1 million in annual revenue before considering adding a CFO. Other sources say $10 million, $25 million, or even $50 million are good revenue markers that would make hiring a CFO appropriate.

Since these numbers can vary widely, it’s important to weigh multiple factors in a business when thinking about hiring a CFO. These factors can include the rate of growth the business is experiencing, the number of employees, and the current and anticipated financial complexity of the business.

Conversely, a Controller can come in at a much earlier stage of the business. Once a company has cleared $500,000 to $1 million In revenue and needs to abide by Generally Accepted Accounting Principles (GAAP), bringing in a controller can greatly help.

Roles and Responsibilities

A CFO can help when a business is at a crossroads or once it’s reached a level of complexity that requires part-time or full-time strategic assistance. CFOs can help with accurate reports and basic accounting functions, manage a team with a controller, create strategies for fundraising and business growth, generate reports for key stakeholders, and provide overall business guidance.

The duties of a Controller may be better described as administrative or operational. Typical activities include internal controls, general bookkeeping, and generating reports for internal and external use. Internal controls include ensuring the separation of duties on key financial processes, authorization, documentation, security, and reconciliation of books.

Some internal controls are more preventative, while others are built to detect and respond to potential vulnerabilities and threats. When businesses are looking to improve their closing processes; cut down on potential errors or security issues; and ensure accurate financial reports for day-to-day decision-making and bank approval for loans, valuations, or acquisitions; a controller will be a great fit.

Hiring v Outsourcing?

When it is clear additional expertise is needed to manage the accounting and financial functions, companies must decide whether to hire internally or outsource. Hiring internally can be a difficult proposition when one considers the expense associated with salary, benefits, onboarding, training, and oversight. The truth is many Denver companies do not immediately require the assistance of an in-house professional. Rather a better option is outsourcing because it is less costly and provides immediate access to seasoned professionals that can immediately step in and get to work. This is especially ideal for organizations that are cost-sensitive.

Contact Us

CFOs and Controllers are important in managing a company’s accounting, financial reporting, and more. Determining the level of support your business requires is essential when determining which position can provide the most value and whether to outsource. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Hanson & Co can help. For additional information, call 303-388-1010 or click here to contact us. We look forward to speaking with you soon.