Have you settled the controller vs. CFO debate for your startup? Both pivotal leadership positions help you steer your startup toward financial success.
Companies in different life stages have varying requirements. Deciding between the roles is simpler when you understand the difference between a controller and a CFO. Does your startup need a controller or a CFO for financial analysis, reporting, planning, or decision-making?
This blog post will address the central differences between the two positions and help you find the best solution for your business.
Understanding the Roles: Controller vs. CFO?
Although controllers and CFOs are financial leaders with some overlap, they hold distinct roles and responsibilities. You should know what they do before deciding which suits your startup.
A controller is a financial behind-the-scenes expert at ensuring the smooth financial running of a startup. They’re responsible for:
- Financial reporting and statements that provide insights into the startup’s financial status.
- Compliance and record-keeping to ensure the company fulfills all financial and reporting.
- Transaction processing and ensuring that the company’s financial data is accurate and current in the accounting system.
In other words, controllers are in charge of managing and overseeing a startup’s day-to-day financial business. They monitor and control accounts payable, accounts receivable, expenses, sales, and inventory, ensuring the company’s economic bases are covered.
On the other hand, a CFO takes a more strategic role in the company. They are responsible for strategic financial planning, decision support, and investor relations.
CFOs develop financial strategies that align with the startup’s overall growth objectives. They also need a broad skillset to understand financial modeling to oversee long-term, critical business decisions that help cope with the ever-evolving business landscape.
They also support management decisions by quantifying and evaluating obstacles and opportunities and communicating the results of those analyses to investors, team members, and stakeholders to progress.
CFOs play a vital role in managing investor relations within a startup to maintain financial stability and growth. CFOs support solid and open communication channels with investors with timely and updated financial information and insights into the startup’s current financial status.
When to Hire a Controller
Startup stages that benefit from a Controller
During the early stages of a startup development – after securing seed funding – it’s time to outsource controller services. This stage might feature frequent and more complex financial transactions and operations that call for engaged financial management by a controller who can ensure that processes run smoothly.
A healthy startup is typically growing quickly. When the startup builds steady revenue streams, a controller is handy for managing expenses, revenues, and cash flow to manage financial operations.
They might also allocate funding and monitor acquisitions, employees, and mergers. These high-value activities call for implementing and monitoring internal controls by a financial controller.
Specific tasks a Controller can handle
- Financial reporting: Controllers provide accurate and timely financial statements, including cash flow statements, income statements, and balance sheets, to paint a clear picture of the startup’s financial performance.
- Transaction processing: Overseeing daily financial transactions while ensuring compliance and accuracy of internal and external regulations.
- Cash flow management: Controllers ensure the startup has sufficient liquidity to finance its operational costs while making informed decisions.
Budget considerations for hiring a Controller
Of course, it varies significantly depending on the industry, geographic area, and experience. On average, full-time, in-house controllers earn above-average salaries ranging between $200k-$300k.
You must also consider onboarding costs, training expenses, and their learning curve. These will factor into how quickly you get value from your new hire.
With the costs in hand, you’ll need to run a cost-benefit analysis considering the advantages of a full-time controller. Do you have room for this person in your budget? Are you getting significantly higher value in return?
When to Hire a CFO
Indicators that your startup needs a CFO
Whether or not you need a CFO can vary depending on your specific circumstances and goals—rapid growth in revenue streams, customer base, and market expansion. You might require a CFO to manage these operations effectively.
A CFO can also provide strategic guidance and expertise in managing a complex financial structure that includes multiple funding sources, navigating tax or regulatory compliance, or optimizing cash flow.
Finally, a CFO can be essential when your startup seeks investors or raises capital. They know how to prepare financial statements, craft financial projections, and communicate the startup’s financial health and growth potential to potential investors.
CFO’s contributions to strategic growth
CFOs contribute by developing and implementing financial strategies aligning with the business objectives. CFOs provide valuable insights into the financial implications of potential growth initiatives, evaluate investment opportunities, and identify risks and returns.
They also lead the financial planning and forecasting processes, ensuring financial goals align with strategic objectives. Additionally, CFOs actively manage financial risks, monitor performance through key metrics, and communicate the company’s financial performance to stakeholders.
Budget considerations for hiring a CFO
Assess your financial health and the size of the company. Startups or smaller companies may have limited resources. An in-house CFO can be expensive for a startup. Initially, you may not have enough activity to fill the in-house CFO’s schedule. Carefully evaluate the cost-effectiveness of hiring a full-time CFO versus outsourcing certain financial functions.
Additionally, the CFO’s experience and expertise will influence their salary expectations. Companies should consider the potential return on investment (ROI) in terms of improved financial management, strategic decision-making, and growth opportunities that a skilled CFO can bring.
Making the Right Choice Between a Controller vs. CFO
Understanding your startup’s needs helps you decide whether a controller or CFO is best for you. Because both are long-term-oriented roles, you must look at your financial perspective and long-term objectives.
At Founders, you can get expert decision-making to match your current needs while understanding the startup’s financial goals. Because we offer both, we can help you decide whether a controller or a CFO is suitable for your startup. Contact us today at Founders and join the many businesses relying on our controller and CFO services.