As companies grow, so do their financial complexities. Businesses switch from Cash to Accrual accounting, staff numbers increase, existing employees settle into more defined roles, and financial reporting moves from online bank registers to programs like QuickBooks. This business growth might be satisfactory for most founders initially, but eventually, the attention needed to manage the organization's finances becomes a full-time job. Whether a CEO is a financial wizard or prefers to stick to the bigger picture, there are only so many hours in the day to get everything accomplished. At this point, the CEO has to consider what type of financial support is best so the leadership can get back to running their business.
Understanding the differences between a Bookkeeper, a Controller, and even a Chief Financial Officer can help you plan for the future. While most small businesses already have a bookkeeper on staff or at least a firm that performs this function, other financial roles are needed to help a business grow. Even though salaries increase based on the title, too many companies often blur the lines between each role which can set someone up for failure down the line. For example, a Chief Financial Officer in a company valued under $1M may perform the duties of a Controller and would struggle once growth reaches $15M. At $15M, a CFO should focus on and drive financial strategies and cannot act effectively as CFO and Controller. They will need to be replaced if they can't keep up with the organization's requirements or become prone to financial mishaps that could be detrimental to the business, such as a failed capital raise or acquisition.
Bookkeepers are crucial to organizing company finances, but their roles are more limited than the other positions mentioned. In larger organizations, these titles often become accounting clerks and concentrate on specific areas to keep up with the increasing volume of business. While they might have some management-level input at the early stages of the company, they focus on the details and day-to-day financial functions. They post financial transactions in the ledger, generate basic reports, conduct accounts receivable and payable activities, assist with audits or taxes, and review cash flow while the business is still small. As the business grows to a point where there's a need for staff with greater accounting skills and someone who can manage multiple Bookkeepers, then it's time to consider hiring a Controller.
The Controller is a very hands-on role that needs to orchestrate all accounting activities to be completed accurately and on schedule. Controllers oversee the accounting team and will become one of the most important staff roles to the CFO. They manage all the detailed accounting processes and summarize them into the company's financial statements. Reporting responsibilities will fall to this role unless analysts are hired to generate reports. Controllers monitor the budget to actual spending, supplier payments, customer receivables, audit and tax payment compliance, internal controls, the accounting system chart of accounts, as well as the daily activities of their direct reports, which include posting general entries and accruals. They will also run the month and year-end close process.
The Chief Financial Officer is responsible for the accounting department and finance activities but spends their time at a strategic level. A CFO who is involved with too many of the Controller's responsibilities can inadvertently divert their attention away from the bigger picture and unnecessarily spend money on these activities since they are paid much more than the Controller. Instead, a CFO should be watching cash flows to know when financing might be needed or developing a strategic financial plan. They work closely with the Controller to identify the necessary tactics to achieve these goals. While not an exhaustive list, the CFO will participate in acquisitions, report risk and mitigation strategies to the board, monitor financial performance and work to finance or reduce costs associated with the CEO's strategies to support company growth or even their exit. There will also come a time when a finance department is needed (which requires a different skillset than accounting) and reports to the CFO. For these reasons, the CFO's skills should exceed those of a Controller, so it's important to distinguish between them. Regarding hiring, it's time to consider adding a CFO position when many of these tasks are increasingly showing up as a business need without the resources available to complete them.
Bookkeepers, Controllers, and Chief Financial Officers all bring different skill sets. There is an overlap between roles, but they all have their part to play in an organization. There is no hard rule about company size when hiring these positions, but paying attention to business needs is vital as this will be the best way to determine the right time. As costs have been mentioned, the more senior the role, the more it will increase payroll. Given the current economic uncertainty, you may not choose to hire full-time staff. Instead, consider firms specializing in outsourced finance and accounting functions, so a fractional Controller or CFO could be considered when the financial justification doesn't support a full-time role. A CFO specializing in financing and capital raises should not double as the Controller. Further, a Controller, in most cases, should not become the CFO for the same reason. At the end of the day, this is about getting the right people in place to manage the business's financial needs so leadership can focus on growth and place their attention back where it belongs.