Is your finance department in transition, or soon to be? What is your best course of action? Whether you are experiencing immediate or impending change or giving consideration to succession, advance thought and strategy will provide a stronger basis for good decision-making. The need to fill a position may be due to release of an […]
Is your finance department in transition, or soon to be? What is your best course of action?
Whether you are experiencing immediate or impending change or giving consideration to succession, advance thought and strategy will provide a stronger basis for good decision-making. The need to fill a position may be due to release of an employee, a loyal and long-tenured employee nearing retirement, or a department that is outgrowing its current structure and capabilities.
Let’s face it, anytime employee turnover occurs, even for the most joyous of reasons, there is upheaval. By planning ahead, business owners can strategically position the finance function to be more effective and integral to the success of the enterprise. An oft-discussed topic is position title. You may hear a variety of terms bandied about from controller to VP of finance to CFO (chief financial officer), and from comptroller to chief accountant. These titles are often used interchangeably, and in many cases the duties required of a position do not fit neatly into a one-size-fits-all container but spread beyond the title that doesn’t necessarily match the responsibilities. Thoughtful consideration of needs, requirements, and expectations is important when determining position titles and assignments.
Let’s focus on the two specific roles in financial leadership: the CFO and the controller.
The controller is often thought of as the head of the accounting department or function. The controller is not a bookkeeper, however. The primary role of the controller is to maintain the books and records for the enterprise, looking back at data that has already been generated. The controller also maintains standard operating procedures and internal controls for accounting and bookkeeping activities.
The CFO, on the other hand, uses the financial data that has been produced in order to accurately predict the financial future of the organization. While a clear understanding of past financial performance is necessary, the CFO’s key responsibility should relate to strategic and tactical planning.
To illustrate the differences between CFO and controller, consider the following. The controller is responsible for producing financial statements that reflect historical activity. Suppose these financial statements reflect a shift in gross profit or productivity. The CFO’s role is to evaluate and articulate the causes behind these changes. Armed with this understanding, the CFO establishes the corrective actions needed to address the risk of continued negative results or employ procedures to support the continuation of positive trends.
In addition to financial and strategic planning, the CFO is responsible for cash-flow management, credit and collections, budgeting, internal controls, and compliance. In a nutshell, the CFO provides financial oversight and management, forecasting, and data-based decisions. By correlating financial, operational, and regulatory data, the CFO advises the executive team and provides the basis for financial impacts of decisions in a real-time manner.
The CFO is a member of the executive-management team, planning and implementing growth and profitability strategies and acquisitions. This individual handles financial analysis and formulates financial, tax, and risk-management strategies.
Whereas CFOs are responsible for developing management reports, financial statements, budgets and financial plans, capital and cash-flow projections, performance measures and internal controls, the role of the controller is focused on preparing reports and budgets, processing capital requests, and maintaining performance measures.
What does your enterprise require? It likely depends on your size, complexity, and vision. Certainly, good financial information is a must. So start there. While you may not require or be able to afford a full-time CFO, the value should not be overlooked. Perhaps a part-time, consultative relationship makes sense? Or maybe an accounting department overhaul is needed.
Whatever your circumstance, a conversation with your CPA is an ideal way to get headed in the right direction.
Gail Kinsella is a partner in the Syracuse office of The Bonadio Group accounting firm. Contact Kinsella at gkinsella@bonadio.com