You say tomato, I say tomāto. You say accountant, I say controller. Unlike tomato and tomāto, the terms accountant, controller, and chief financial officer (CFO) do have significant differences.
We could go into great detail on what makes them different (oh wait, we did). Instead, here’s a basic breakdown of the difference between the three:
- An accountant is responsible for entering day-to-day transactions and performing basic accounting functions. These could include entering bills and invoices, running payroll, paying sales tax, etc.
- A controller is responsible for the accuracy of the financial statements, preparing budgets, calculating financial ratios, etc.
- A CFO is responsible for a forward looking perspective. They are involved in strategic planning and providing improvement recommendations based on the financial ratios provided by the controller.
Each of these positions relies on the other to get the information they need and to make your accounting and financial processes run more smoothly. Each has a distinct purpose and each is important for the financial health of your business.
Now we know what you’re thinking … there are THREE positions. Yep. But that doesn’t mean they’re three people. Technically, one person could perform all three positions. Often times in small businesses, this is exactly what happens.
The first position you will need is an accountant. Do not take this position lightly. One of the greatest needs of business is the need for good financials. Hire someone who has the knowledge and experience to do a good job, like someone who has experience working with your type of business, or has a strong financial background. If you hire the right person with the right experience, they can also serve as your controller. A CFO is needed when you begin to use your financials as a management tool.
Yet at a certain point, you need to begin to think about expanding your financial department and separating the roles. Knowing when to separate depends on your business. Consider who will be looking at your financials and the purpose for those financials.
So what if you’re just not ready for all three positions? Or, what if you are, but financially you’re not ready to hire all three. After all, recent research shows that a CFO can cost over $125,000.
Look into outsourcing it! A trusted business advisor or accounting firm can help you outsource any number of functions, from the day-to-day functions all the way to the CFO level. Not sure how to find the right advisor to help? Here are six questions you can start with.
By outsourcing these positions, you can free your time to work on your business. Plus, you’ll have a trained professional who can help you understand the importance of your finances and why they matter.