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CFO, Controller or Bookkeeper: What you need and when you need it

As an Entrepreneur you know that taking a risk comes with the job description. Without that willingness to go out on a limb, you limit the possibility of inventing the next iPhone or discovering a breakthrough medical device. Your focus must be on innovation and creativity, but this myopic vision leaves you open to vulnerabilities in important areas like financial management. Having blinders on when it comes to financial management is one of the common characteristics of companies with amazing technologies that close their doors before they can change the world. Accounting, fund raising, budgeting and cash flow management are complicated subjects with many potential hazards. The positions of Bookkeeper, Controller and CFO each have a specific purpose to serve. Read on to learn the difference and which one would be most beneficial to your company.

The building blocks of the Bookkeeper

There will come a time relatively early on in your company’s existence when it no longer makes sense for you to take time away from other critical business activities to handle the day-to-day bookkeeping.  It could be because the volume of transactions is increasing rapidly, headcount increase is making payroll more difficult or just the complexity is getting to be too much.  At this point, it will probably make business and financial sense to bring on a bookkeeping resource, even if part-time.  Hiring one, even on a part-time basis, can help businesses avoid the most common pitfall: spending more than they have. The bookkeeper monitors and records the day-to-day financial activity of your business. These individuals are deep in the mix of your business' financial activity but have little power over your company's finances. Every transaction that your company makes, every piece of financial paperwork that an employee fills out and all invoices and payroll records are the responsibility of the bookkeeper.   

Triggering events that tell you that you may need a controller are:

  • You need help developing an operating budget, forecast or financial model for the company
  • You have potential investors beyond friends and family
  • Your revenue is ramping up over several periods

The management of the Controller

As your business grows, it will become more functionally segregated and more complex to manage. In a growth-oriented business that relies on cash management for survival, a controller is a crucial investment. While ultimate decision-making power remains with senior management, Controllers are responsible for creating regular financial reports that are customized to monitor and improve business and include things like key performance indicators (KPI) or financial dashboards. When you employ a Controller, he or she should be able to discern which financial software and systems would be most appropriate for your company as it grows. The individual should also have the skills to maintain and manage these systems. This role handles the increasingly demanding financial aspects of your business, allowing you to focus on continued growth and development. 

Triggering events that tell you a CFO may be in order are:

  • You are pursuing significant later‐stage venture capital
  • You have or are considering international operations
  • Investors are requiring more frequent and more sophisticated financial information
  • You have complex banking relationships
  • There is rapid expansion in your business

The oversight of the CFO

CFOs are responsible for overseeing all financial management in your business and protecting your bottom line. CFOs should be capable of planning, projecting, measuring and tracking the financial operations and progress. As the chief financial management team member in your company, your CFO will manage the financial team and report regularly  on the financial results of the company to the board of directors and rest of the senior management team. These individuals serve as a part of the management team and have influence on the direction of the company based on their decisions and suggestions. Any major strategic initiative of the company should include the CFO, including acquisitions or divestitures, geographic expansion, product line expansion, sales channel changes or product pricing. Additionally, CFOs are trained to predict market shifts and new areas of business potential before anyone else and can direct the finances in a way that capitalizes on these trends.

The CEO/CFO relationship is critical as the CFO is frequently the CEO’s “right hand” and trusted advisor. Beyond straight accounting and finance, your CFO may wear many additional hats, including deeper financial planning and forecasting, strengthening internal controls, putting a proper corporate governance structure in place, leading the HR function and performing investor relations.

As the Entrepreneur, your focus must be on innovation, creativity, and execution of the business plan. That means that even if you are capable of doing the financial management and planning it will not be the best use of your time. You can rest assured that when the times comes to choose a CFO, Controller and Bookkeeper you understand the roles and what skill set you will need.