When your tech startup is young and scrappy, people wear a lot of hats. In fact, in its early days, you might have even overseen the company’s finances.
As you grow, though, you want to bring in people with the required expertise to continue scaling successfully. And when it comes to your company’s financial function, that means bringing in people with a specific background, like a controller and a chief financial officer (CFO).
If you don’t have a background in finance yourself, those two roles might seem pretty similar. They actually have some key differences, though. To help you understand them — and which one might be best for your tech company’s needs right now — let’s dig into the differences.
Scope of vision
A controller — also called a comptroller — needs to have a strong sense of focus. This person’s job is to be heads-down in your company’s books, ensuring that everything is being accurately recorded and reported. They’re in the weeds with your accounting systems, overseeing everything from balancing your books to maintaining tax compliance. A controller’s role is focused on execution and accuracy.
A CFO, on the other hand, operates in more of a heads-up role. Rather than focusing on the brass tacks, a strong CFO should zoom out. As the head of your finance department, they need to develop a vision for where your company is headed. That means they shouldn’t just be evaluating what’s happening internally. They also need to look outward, from analyzing the market to evaluating the competition. The CFO gets tasked with developing a long-term strategy to help your company thrive.
In other words, a good controller’s work is often very granular, getting into the details to ensure accuracy in your company’s financial statements on a daily basis. A CFO, on the other hand, has to think big picture to provide the guidance your business needs through the years.
Areas of expertise
Controllers and CFOs both come from the finance world, but they may have different backgrounds.
A controller will almost always be a certified public accountant (CPA). That certification ensures that they’re up to date on best practices like Generally Accepted Accounting Principles (GAAP). They should also have expertise in the tax requirements that apply to your specific company based on both its type and location. Long story short, a controller’s primary area of expertise is accounting.
Some CFOs are CPAs, but that’s not always the case. Rather than a background specifically in accounting, the CFO might have broader experience. In some cases, they have a financial background, but in others, their expertise lies in managing a business and driving its strategy.
Your CFO absolutely needs to understand the world of finance, but they might have a more varied skill set. If someone can understand the financial implications of your specific business vertical, that’s enough. More importantly, you need to find a CFO who can come up with a plan of action to grow your revenue and protect your bottom line.
A controller’s work focuses on what is, while a CFO spends a good portion of their days thinking about what will be.
As your company’s lead accountant, the controller ensures that financial dealings at your business get properly reported and that accounts are reconciled. Depending on the size of your company, they may also have direct reports and spend some of their time managing those individuals.
Generally, a controller’s purview includes:
- Managing accounts payable and receivable (e.g., approving invoices and payment of them, overseeing collections)
- Maintaining your chart of accounts
- Running payroll
- Creating monthly, quarterly, and annual financial reports
- Preventing and detecting fraud
- Monitoring and paying down the company’s debt
- Creating financial reports for internal and external use
- Overseeing or completing account reconciliations
- Controlling access to the company’s accounts
- Filing or supporting the accountant filing the company’s tax returns
- Ensuring compliance with legal and tax requirements
A CFO, on the other hand, primarily functions as a strategist and advisor to the CEO and the company’s Board. As a result, they might spend their days:
- Planning for revenue growth
- Forecasting the company’s finances
- Managing treasury functions (e.g., equity, debt)
- Pursuing strategic partnerships
- Representing the company at public events
- Reviewing and attesting to the controller’s financial reporting
- Overseeing investments
- Looking for and implementing cost-saving measures
- Managing financial risk (e.g., cybersecurity, fraud)
- Developing the company’s financial policies and processes
Org chart differences
On your company’s organizational chart, the CFO ranks higher than the controller. If you have both roles filled at your company, the controller generally reports to the CFO. The only departure from that comes if you have a VP of Finance. In that case, the controller generally reports to them and they, in turn, report to the CFO.
If you have other employees in your finance department, they generally report to your controller (or to a finance manager who reports to the controller). As a result, the controller is more involved in day-to-day people management than the CFO. This should keep the CFO free to drive higher-level company culture decisions.
As a general rule, many companies start exploring hiring a controller once their annual revenue exceeds $5 million. Similarly, historically, they’ve looked into bringing on a CFO once annual revenue tops $25 million.
You don’t necessarily have to do things in this order, though. In fact, as a startup, your company might dramatically benefit from the strategic guidance a CFO can offer.
That’s why a lot of startups hire a fractional CFO. This is essentially an outsourced CFO, giving your company the advisory services it needs without the price tag of a full-time C-suite executive.
In fact, with a fractional CFO and an accounting firm to handle your bookkeeping and tax filings, your company may be able to thrive for a long time without adding these full-time finance roles to your payroll.
If you want to explore hiring an accountant to fulfill a controller’s duties for your company or a fractional CFO, contact us. Here at ShayCPA, we specialize in providing both accounting and CFO advisory services for tech startups.