Controller vs CFO: Which Financial Leader Does Your Business Need?

Proper financial leadership is crucial for your startup’s success. That said, your startup can choose to add several financial leadership roles, two of the most popular being a controller and a CFO. However, while these roles may seem similar, they’re very different.

Controllers work more in the day-to-day, while CFOs tend to focus on the bigger picture — and while both have their place, young startups with limited resources often must decide between one or the other until their operations can adequately support more financial leadership positions. In this post, we’ll explain the key differences between a chief financial officer and a controller to help you make the best decision for your startup.

What Is a Financial Controller?

Controllers tend to manage the day-to-day operations of your startup. Key tasks include performing daily accounting, ensuring accurate financial records and complying with regulations. Controllers often report directly to startup leadership and also have supervisory responsibilities themselves.

Controller Qualifications and Background

Most controllers have a solid resume of professional accounting experience, often serving for five to 10 years in accounting or accounting management roles before becoming a controller. Many controllers are also certified CPAs and have a strong background in finance.

Where Controllers Fit in the Organizational Structure

Controllers tend to be leadership positions within a startup, with such professionals reporting directly to either the CEO or the CFO. They also supervise internal accounting staff members and work with internal departments and stakeholders.

What is a CFO?

Unlike a controller, who works more in the day-to-day accounting world, CFOs are more big picture. They’re more involved with strategic decision-making, long-term financial planning and overseeing the financial strategy of your startup.

CFO Qualifications and Background

A CFO isn’t something a financial professional becomes right out of college. Most CFOs have 10 to 15 years of professional experience and have served in previous financial leadership roles. Many CFOs also hold advanced degrees, like an MBA or a Master’s in Finance, and may have advanced certifications, such as a CPA or a CFA.

The Evolution of the Modern CFO Role

CFOs tend to report directly to the CEO and have a major hand in influencing a startup’s growth and strategic direction. It’s part of an ongoing shift that has today’s CFOs blending financial expertise with business acumen to add more value to the startups they serve. Today, CFOs are increasingly focused on using technology and relying on data analytics to drive growth and transformation.

Controller vs CFO: 6 Key Differences

1. Accounting vs. Finance Focus

Controllers are financial specialists first and foremost. They perform their day-to-day duties in compliance with generally accepted accounting principles (GAAP) standards and technical precision. CFOs, conversely, have more of a broader perspective and are also involved in financial planning, capital markets and investing.

Controllers often have a Bachelor’s degree in some aspect of finance and are certified CPAs. In addition to a Bachelor’s degree, CFOs often have an advanced degree, such as a Master’s in Finance or an MBA, in addition to earning certification as a CPA or CFA.

2. Tactical vs. Strategic Approach

Controllers are more focused on tactical operations, while a CFO works more on strategic and long-term planning. Controllers largely perform the day-to-day work and have daily, weekly and monthly deadlines that they need to hit to keep startups on track, while CFOs take the data provided by the controller and use it to set long-term business goals and strategy.

3. Internal vs. External Perspective

A controller is largely focused on internal processes, controls and finances, while a CFO also mixes external responsibilities into their role. In addition to supporting a startup’s internal operations, CFOs also analyze market trends, investment opportunities and stakeholder relations as part of their responsibilities. These internal and external-focused positions help provide well-rounded financial leadership.

4. Historical vs. Forward-Looking Analysis

Controllers largely focus on data and accurate financial reporting, and CFOs use this historical data to forecast projections, plan scenarios and assess future growth opportunities.

5. Department Leadership vs. Company Leadership

Controllers lead accounting departments, while CFOs lead startups. CFOs have broad leadership that spans all financial functions and influences the entire startup.

6. Operational Oversight vs. Strategic Direction

The main role of a controller is to effectively and efficiently run financial operations within your startup, while CFOs are more focused on the big picture. Think of it like this: Controllers are focused on supporting your startup where it currently is, while CFOs are tasked with leading it where it wants to go. CFOs set direction and initiate growth. Together, both positions can create balanced financial leadership.

Controller Roles & Responsibilities

Controllers oversee and manage a startup’s financial operations. Core functions include:

• Financial statements and reporting
• Budgeting
• Accounts receivable/accounts payable
• General ledger

Controllers are also tasked with identifying potential financial risks, implementing and monitoring internal controls, coordinating audits and complying with industry standards.

CFO Roles & Responsibilities

The CFO oversees all aspects of a startup’s finances, from strategic financial planning and analysis to managing investor relations, to ensure your company’s financial health and sustainable growth. Some of the core duties of a CFO include:

• Financial management, planning and analysis
• Overseeing and managing budgeting
• Cash flow and risk management
• Managing mergers and acquisitions
• Communicating with investors and shareholders about financial performance

When to Hire a Financial Controller

Generally speaking, your startup should look into hiring a controller when its current finances become too difficult or complex for founders or existing employees to handle effectively. If you’re a business owner juggling financial oversight with other critical tasks, this can be a key inflection point. This tends to happen as startups grow and evolve from early-stage startups to growth mode. Some of the other thresholds that often spur controller hiring include:

• A need for more streamlined financial processes
• A need for accurate financial reporting and financial data
• A desire to free up startup leadership’s time to focus on matters they’re better suited for
• A need to ensure compliance with accounting standards and regulations

When to Hire a CFO

Typically, your startup should look into hiring a CFO when it reaches a revenue milestone of $1 million or more annually, or when more sophisticated financial planning and analysis are needed. Some other key instances that a CFO should handle include:

• When your startup is preparing for an IPO
• Before fundraising rounds
• If your startup needs more strategic financial leadership

What Size Companies Need a Controller vs CFO?

While your startup can benefit from a CFO at any level of its tenure, most tend to start with a controller and then add a CFO when revenue reaches a certain point. For example, startups earning $10 million or less in annual revenue will usually start with a controller, and then add a CFO when revenue gets to the $35 to $50 million range. A CFO may also be hired when high-level financial expertise and more strategic thinking are needed.

Fractional and Outsourced Options: Flexibility for Growing Startups

While startups can hire their own controller or CFO internally, a more cost-effective option is to outsource these positions. The average controller makes north of $100,000 per year, and the average CFO about $230,000 per year. Conversely, Graphite Financial’s fractional CFO plans start at $1,250 per month, offering a much more cost-effective option for resource-limited startups — and one that can scale up with your startup as it grows and evolves.

Controller and CFO: Building a Complementary Financial Team

Controllers and CFOs are part of a functional finance department. Each professional brings different skill sets and expertise to the table, which makes for a well-rounded financial department and supports the startup’s overall goals and objectives. As startups grow and evolve, more comprehensive financial leadership should be added to support their overall goals and initiatives.

How Graphite Financial Helps Startups Access Expert Financial Leadership

For more information on the key differences and value in the controller and CFO positions, contact Graphite today. Graphite has provided financial leadership to hundreds of startups since 2016 and specializes in providing services to meet the unique needs and requirements of your startup. Contact us today for more information and to schedule a free consultation.

FAQs

Is a controller higher than a CFO?

No, a CFO is a higher position than a controller.

Can a controller become a CFO?

Yes, many controllers often go on to become CFOs in their careers.

Do small businesses need both a controller and a CFO?

Usually, a small business or a young startup only requires a controller. However, as the startup evolves to become a medium-sized or larger operation, more comprehensive financial leadership may be necessary.

What qualifications should I look for in a controller versus a CFO?

For a controller, look for five to 10 years of financial experience and an educational background in finance. CFOs tend to have 10 to 15 years of professional experience and hold advanced degrees, such as an MBA or a Master’s in Finance.

How do controller and CFO salaries compare?

The average full-time salary for a controller and CFO in the United States is about $100,000 and $230,000, respectively.

Can a fractional CFO replace a full-time controller?

Typically, fractional CFOs and full-time, in-house controllers are better when they can work together. The controller can continue to perform day-to-day duties, while the fractional CFO can set long-term strategy.

At what revenue stage should startups consider hiring a controller or CFO?

Your startup should look into hiring a controller when its current finances become too difficult or complex for founders or existing employees to handle effectively. Consider hiring a CFO when revenue reaches $1 million annually.

What’s the difference between a VP of Finance and a controller?

A VP of Finance is a senior-level professional that focuses on planning and strategy, often leading the financial department. Controllers tend to be more operationally focused.