Why Your Controller Isn’t A CFO

by Feb 13, 2018Talent

It’s a mistake to think your controller will make a good CFO. Odds are, they won’t.

In the early days of growing your business, you’ll need to hire a bookkeeper or a controller to manage your books.

But as you grow and scale your business, you might eventually need to bring on a CFO. The mistake to avoid making is thinking that your controller will make a good CFO. Odds are, they won’t.

Let me explain.

The truth is that the skills needed to be a good controller are vastly different than that required of a great CFO–which is something that a lot of entrepreneurs miss, particularly if their gift isn’t in finance.

A controller’s job is to make sure your books are in perfect order. They analyze your accounts and make sure everything is debited or credited accurately and that there are no mistakes when it comes to the cash inflow and outflow of your business. If you don’t have accurate numbers, you might make a bad decision. This is super important and one of the reasons this is an early hire.

A CFO, on the other hand, is more than just a numbers cruncher. He or she is a businessperson–who also has a finance background. While they have a responsibility to ensure that the numbers are accurate, they aren’t doing that work themselves–that’s the realm of the controller.

Rather, the CFO’s job is to get at the root stories behind the numbers–to explain why revenue is down, for instance, while profits are up and what to do about it. The CFO is also someone who is far more engaged with the balance sheet of the business. They serve as an adviser to the CEO in terms of deciding if the business is too asset heavy or whether you should be renegotiating your covenants with your bank. The CFO is also focused on the long-term finances of the company in terms of forecasting as well as how the business might fund, say, an acquisition by borrowing or other means.

These are all high-impact duties that most controllers would struggle with. While there are some controllers who can make the leap to taking on the role of a CFO, it’s actually a bit rare. Part of the reason is that many controllers don’t really understand how the role of the CFO differs from that of working heads down on the books. This is particularly true for someone that joined your small company as a bookkeeper unless they have aggressively developed themselves.

That’s why most companies eventually look outside for someone with the experience and skill-set they need when they want to install a CFO.

So if your business is on a fast-growth path, and you’re looking for that next level of financial and strategic adviser in your business, don’t just automatically promote your controller to that role. Stop and consider if they understand how their job would be different–and if they have the aptitude to make that leap.

If not, then you and your business will be much better off by looking outside to find the ideal CFO.