“Maybe it’s time for you to get a Controller.”
Entrepreneurs who experience significant growth in their business may eventually hear this advice. Financial management in a growing business can become strained, and eventually it can become time to upgrade your team. What exactly does a controller do in a business? And how much will one cost me?
The titles bookkeeper, controller and CFO can get tossed around rather loosely in small and growing ventures. But, these titles have specific meaning. And which type your business really needs can vary from situation to situation.
A bookkeeper performs basic financial record keeping and can create simple financial reports. A bookkeeper does the following basic tasks:
– Keeps accurate records of financial transactions and can create basic financial statements (Income Statement and Balance Sheet) using accounting software.
– Performs basic A/P management — makes sure bills get paid and records these entries into the accounting system.
– Performs basic A/R management — if the business has to send invoices to customers to get paid, sends out invoices usually once a month.
Moving up to a controller adds more power to your financial management. In fact, a good controller can often pay for herself in a growing company that needs more advanced systems by helping to keep costs under control and by helping to better manage cash flow. A controller does the following tasks:
– A controller will either perform all of the functions of a bookkeeper, or supervise the staff that does.
– They can create customized daily, weekly and monthly financial reports to meet the specific needs of your business.
– They have the knowledge to choose and maintain financial software.
– They can take over the basic cash flow management of the business. Major cash flow decisions will still be up to the entrepreneur, however.
Some businesses eventually need a Chief Financial Officer. But many very large organizations don’t have one, so don’t assume that your business will. We never had one in our business even though we got quite large and complex. A CFO does the following tasks:
– Performs all functions of a Controller.
– Is able to structure and negotiate complex financing, including debt and equity.
– Can create complex financial projections to aid in strategic decision making, and is an active player in the strategic management of the business.
– Manages banker and other financial relationships for the business.
A senior bookkeeper can cost between $30 – $50,000, depending on the local market and their work experience. A controller can cost at least twice that. And an experienced CFO can cost twice as much as a controller. Again, salaries can vary widely between various cities, and experience levels will also be a major contributor. So talk to other entrepreneurs in your area who have larger businesses than yours to get an idea of the local market salaries for these positions.
Use your CPA firm and your network of fellow entrepreneurs to find a pool of applicants. Placing a general ad should be your last resort, as it will be difficult for you to differentiate between the actual skills and competencies of the candidates.
Dr Jeff Cornwall
Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.
Dr. Cornwall,
I want to add some additional perspective on this decision point for entrepreneurs and small company executives:
1) Bookkeepers are by nature transactional employees. Sometimes you will come across an experienced bookkeeper that can accomplish similar functions as a controller, but will likely lack the accounting and financial background to add much value past pure processing. Bookkeepers also tend to serve as office managers as well taking care of payroll, insurance, and many times customer/sales support roles.
2) Controllers may or may not come with a CPA certification, but should have an accounting degree or background. A good controller should have served as an accountant in either a public accounting firm or in private industry. The decision to hire a CPA versus a non-CPA controller depends on several factors for private companies:
a) Is the company backed by private equity or venture capital?
b) Does the company have lines of credit or loans from financial institutions?
c) Is the ownership makeup of the company somewhat complicated requiring multiple reporting levels?
d) Does the business inherently have complex workflows with employees wearing multiple hats?
e) Does this business expect to see heavy growth over the next 12-18 months?
If the answer to any of these is “YES,” then I would seriously consider a CPA versus a non-CPA controller. Getting certified as a CPA and maintaining that certification is not easy and usually demonstrates that individual has the ability to visualize and dissect complicated issues which should provide business owners with comfort on internal controls and financial transparency. The bigger the business gets, the more ripe for fraud and shrinkage it gets.
3) Chief Financial Officers (CFO) are an investment for business owners. I have found that there are 2 types of CFO’s out there: (1) strong tactical and technical accounting managers and (2) strategic financial executives. What I come across most often are entrepreneurs who do not understand the distinctions between accounting and finance; usually, they lump the two together and many CFO positions get filled by glorified accountants. Here is how I look at the two:
a) Accounting manages the information supply chain (reporting, compliance and transparency) or how should transactions be recorded in order to reasonably estimate history and current reality of the business while providing assurances to management and shareholders that the results can be trusted?
b) Finance manages the financial supply chain (planning, evaluating and timing) or what should we be doing to maximize shareholder value while minimizing various risks in such a way to keep the cost of doing business as low as possible?
I am sure there are better explanations out there but this is just a blog comment.
Any and all of these functions can be outsourced for periods of time while you decide what is best for your business, but as you grow, you will likely have a need for all. They should not be seen as upgrades but instead as additional levels added on to your growing business. You don’t want to hire a CFO to do bookkeeping even though they likely could and you don’t want to assume a bookkeeper can handle what a good controller can bring to bear. Know your needs and hire for the future.
Josh Tabin, President
Mosaic CFO
Paxil.
Paxil withdrawal. Paxil cr. Side effects of paxil. Paxil side effects. Paxil. Paxil cr versus effectiveness.