April 12, 2022 •ROARK
The two most important positions that you'll need to look at for your internal accounting and finance department, Chief Financial Officer and Controller. Let’s dive in today and talk about the difference between those two positions: CFO and Controller.
What is a Chief Financial Officer (CFO)?
CFO is the top financial executive within an organization. They deal with financial strategy. They may lead multiple functional areas within a company, and they’ll keep an eye on market conditions to best position the company for growth. They're very focused on the future. And they're the right hand or advisor to the Owner, CEO or President of the organization.
What is a Controller?
The controller is the accounting leader. They're in charge of the accounting department. They keep accurate and make sure that there's timely financial information for the organization and external parties. They typically are the leader of the accounting department only. The Controller reports to the CFO, or if no CFO exists, they report to the CEO, Owner, or President of the organization.
Key Differences in a CFO vs. Controller
The question is what are the key differences between these two positions? First, the CFO is future-focused, they're looking at what is going on in the market, trends, and how to grow. Whereas the Controller is historically focused. The controller is looking at what happened today or what's happened in the past.
A CFO is going to have a finance specialization with an accounting background, versus your Controller, who will have an accounting specialization with maybe a finance background that they're applying. This leads to the CFO being more strategic and looking at the information from the controller.
The controllers are looking at the current numbers and making sure that they get the numbers right. They also look at historical numbers or those from the past. Whenever you want to look at trends that are happening within the industry – the CFO would be the role looking at this outside the organization versus controllers will look more at internal controls to make sure that make sure things are accurate and timely.
As far as the reporting goes, your CFO is usually the external voice or representative to third parties within the organization. They're the relationship builders versus your controllers. They will be more focused on the interpersonal relationships within the organization generally.
Role of the CFO
The role of the CFO overall is a financial strategy and business strategy. They are thinking, “what do we do with this financial information? How do we use it to make the company better, bigger, stronger, and more profitable?” They also look at corporate portfolio management and capital structure. And as we talked about earlier, they made lead departments such as human resources in addition to the accounting and finance department.
Key Responsibilities of the CFO
The CFO’s key responsibilities include:
- Advise CEO, Board, and Executives on financial/operational topics
- Attest to financial reporting
- Leads all financial operations and team
- Treasury (including investment, debt, and equity)
- Planning revenue growth
- Scenario planning
- Change management
- Risk management
- Lead hiring and training programs for finance and accounting teams
- External company representative
Role of the Controller
Controllers are the senior accounting leadership, a person within the organization. They're really focused on the accounting department the financial close process and making sure that they get accurate and timely financial information out to third parties, as well as internal to the management team and financial statements and reports for other decision-makers as well.
Key Responsibilities of the Controller
The Controller’s key responsibilities include:
- Accounts Payables /Accounts Receivables
- Company Payroll
- Chart of Accounts Accounts
- Company banking banking
- Internal Controls Controls
- Internal financial reporting reporting
- Compliance (legal/financial/tax)
- External reporting (Tax, GAAP, SEC)
- External Audits Audits
- Find cost savings
- Lead/Hire/Train accounting staff
When to Hire a CFO
If you are a startup company that's receiving venture capital money or rounds of financing from external investors, you're going to want to hire a CFO. It's going to help you with the capital raise too. There are requirements and responsibilities around that money that you're raising and how that money is managed. And you're going to want to be able to report that if you're looking at going through major growth, you're going to want the CFO to help you obtain the financing and make sure that you're on the right track.
If you're a company that is going through a strategic event, maybe your company's struggling so you need bankruptcy or turnaround type of assistance, or you're looking at Mergers and Acquisitions (M&A), whether you're buying companies or selling companies. There are five types of specializations where you will want a CFO with experience in that specialty. These specializations include capital raising, strategic growth, M&A, public company or IPO specialization, and bankruptcy/restructuring. An executive search firm can help ensure you get the right CFO for your business.
When to Hire a Controller
You're going to want to hire a controller typically before the CFO. They are usually the ones who are putting the numbers together as you're growing. And that's going to be your first hire. You're going to want to hire a controller whenever you decide outsourced finance and accounting solutions no longer make sense. Outsourcing is a new trend in the industry that smaller companies should be looking at. We'll talk a little bit more about that later. But we call it graduating here at ROARK when you've graduated the outsourced solution, and you're looking to insource and that's when you're going to want to hire a Controller.
You're also going to want to hire the controller when you need someone to own the accounting processes and really put those in place to provide better information for your CPA. And a lot of times that's around external reporting to third parties, whether it's your bank, your investors, just simply because they're going to be the ones to be able to do the accrual financials for you.
What Size Companies Need a CFO
In startup companies, where you're getting external investor capital and looking to raise capital, you're going to want to hire a CFO and that’s usually in your tech and biotech types of companies. But typically, most companies hire a CFO when they hit revenues between $50 million to $100 million, it just depends on your growth trajectory and your strategic initiatives when you're going to want to bring in that CFO.
However, if you're looking to take on an acquisition or doing divestitures, or looking to turn around, you're going to want a CFO within your organization sooner than later.
What Size Companies Need a Controller
Typically, you will need your first controller at $20 million in revenue. This will vary by industry but it is typically what we see at ROARK.
$20 million in revenue is going to be a good benchmark. However, an even more telling sign is when you need to convert to accrual or GAAP-based financial statements or have external audits. You’re going to want to have a Controller in place.
What Size Companies Should Outsource Controller and CFO Services
Now, as we talked about a little bit earlier, there are outsourced options for finance and accounting, and I think these are great options for smaller companies.
This is a newer trend that I think has really taken hold within the industry. Big companies have all these resources to be able to help them grow and expand and get information. We love the benefits of an outsourced finance and accounting solution as it starts leveling the playing field for smaller companies.
Outsourced finance and accounting solutions are great for companies that are pre-revenue up to $20 million in revenues typically. These solutions give you the ability to have that CFO, that strategic level guidance, as well as the Controller in a part-time capacity and the tactical and a professional accounting team to really help accelerate that growth curve. Obviously, if you're going through projects, especially the smaller company level, this probably really starts to make sense.
Controller vs. CFO Salaries
When we look at CFO salaries versus Controller salaries, I’ve got to tell you the one thing, this is highly variable. First, the market has been on fire lately. But there are other important factors such as:
- Company ownership
- Company size (revenue/employees)
- Location
- Industry
- Educational experience / specialized skills
So if you look at some of the star performers (also referred to as A-players) in Southern California.
From a CFO perspective, they're typically commanding anywhere from $250,000 to $350,000 base salary in mid-market companies. In some areas you might be able to go as low as $200,000 for the CFO. But again, it depends on the quality of the CFO that you're looking for.
And Controller salaries are typically somewhere between $165,000 to $230,000 for star performers (A-players) in Southern California.
For a more detailed breakdown of salaries for CFOs and Controllers, check out our 2022 Total Compensation Guide. It gives a total breakdown of salaries for these positions, bonuses, benefits, and other compensation that we think you will find useful.
A common question is what is a controller or what is a CFO and how can I tell? We shared a great deal of information here that we hope is helpful. We find it is often like the colors light blue versus dark blue or light green versus dark green.
But whenever we here at ROARK, look at Controllers and CFOs, we definitely have our thoughts on where someone reaches that level and are happy to share that with you along with any questions that you may have around compensation as well.
Please give us a call if you would like to discuss this further.
We hope you find this helpful in looking for your next CFO or Controller within your organization.