What Is the Difference Between a CFO and Financial Controller?

Young Accountants looking to pursue a career in finance may have their sights set on rather different positions,  however, Financial Controller and Chief Financial Officer would probably be two of the most sought after.

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As in any position, there is never a clear-cut difference in terms of responsibility; on occasion a Financial Controller of a large public listed company may have duties very similar to a Chief Financial Officer of a small to medium sized enterprise. This article however focuses on the key differences between the two roles.

Financial Controller

Financial Controllers typically report to a CFO, or an FD and they usually lead the finance department or a finance team. The main role of an FC revolves around financial planning, financial reporting and in general monitoring the health of business operations.

They have direct reports that include Accounts Receivable Manager, Accounts Payable Manager, Accounting Manager, although these roles may sometimes be within a shared service centre, and potentially a Financial Planning Manager.

The role is a leadership position, and a senior one, however it does not have the same level of exposure that a CFO has but it is a necessary steppingstone to becoming one.

CFO

The CFO, as mentioned in previous articles here and here is the pinnacle of a young professional’s finance career. It’s the ultimate job unless one wants to aim for the CEO role.

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The job scope is much wider than that of Financial Controller and will involve areas such as risk management, optimisation of capital structure, exposure to capital markets and investor relations and to an extent, depending on the profile of the company, investment banking.

The CFO, together with the CEO, is ultimately responsible for the business direction and financial strategy of the company.

The Main Differences Between a Controller and a CFO

Besides the job scope, which will be touched on later in the article, the key difference between the two roles is exposure and focus. Chief Financial Officers are these days outward looking and, whilst setting financial strategy, their interaction would be mostly with investors, customers, suppliers, and regulatory bodies.

Whilst they are still responsible for financial data and accurate financial reporting their day-to-day activities are very limited in those aspects; that is where the Financial Controller comes in or sometimes a combination of Finance Directors and Financial Controllers depending on the size of the company.

Financial Controllers typically are inward looking; they will oversee accounting department operations, cash flow management, producing financial statements and in general be responsible for the day-to-day management of a financial department and company’s finances, whether it is representing financial information, liaising with banks and external auditors or monitoring internal controls.

CFO: The Strategist

The CFO occupies one of the seats of the table of the Board of Directors; the expectations is for them to provide financial advice and to steer the company towards growth.

They need to have the ability to deal with ambiguity or decision making with imperfect information and are seen as co-pilot to the organisation.

The role is therefore strategic.

What Are the Daily Responsibilities of a Chief Financial Officer (CFO?)

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CFO duties vary depending on the size of the organisation, and whether it is a privately owned, or business-owner run or public listed company; however, the variance, rather than responsibilities, is more related to the external stakeholder that they have to engage.

The CFO will often cover investor relations as well as presentations to investors to enhance the profile of the company or even to raise funds. They will occupy a critical position in setting the financial strategy of the company and the business direction together with the CEO and as such they will have to manage their relationship with the Board of Directors as well as shareholders or bondholders.

They are often seen as co-pilots of the company and whilst maintaining responsibility for financial reporting and accuracy of financial statements, their day-to-day activities will revolve around planning ahead, managing risks, and optimising the financial performance and the overall financial health of the company looking forward.

They are key decision makers and these days they will take a data driven approach to financial management

The Tactical Controller

The Controller, whilst still having a strategic component to their role, focuses more on tactical decision and operational finance.

Although in most organisations a Controller will be seen as an advisor, their level of advisory is on a much lower level than a CFO and will revolve around profitability, cost, and cash management.

Financial Controller Duties

A Financial Controller will have limited exposure to financial strategy and be more hands on with operational finance.

They will manage a finance department, and co-ordinate budgeting and forecasting as part of financial planning. They will monitor company accounting processes and be heavily involved in financial reporting, safeguarding financial records and historical data and in general a company’s accounting processes.

Normally Financial Controllers are also responsible for ERP and the overall system of internal controls. In smaller companies they may also look after payroll processing, tax statements and tax filings if they can’t rely on a Tax Manager. Their job role responsibilities may also include the more operational tasks of bank reconciliations, financial period close, the preparation of GAAP financial statements and managing eventual cash shortfalls.

Financial Controllers will have a limited involvement in financial strategy, however it is expected for them to undertake cost savings exercises and advice, manage profit margins and potential IT security breaches by virtue of their role as the custodian of financial records and systems.

Financial Controllers, CFOs, and Technology

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Technology is a key component of both roles: the evolution of ERP systems, AI data analytics, and data lakes, all mean that both roles have a huge amount of data at their fingertips in order to either prepare financial reports, execute competitive analysis on their business landscape and make critical company decisions.

In a data-driven culture, and with millions of data points available in today’s modern MIS (Management Information Systems), both roles are very well equipped to support business growth whilst managing risk. The CFO would normally have a large say in the selection of MIS, but it will be the Financial Controller who will manage the financial data and ensure the execution of the project. Both roles therefore require a level of technology savviness.

When To Hire a CFO

There is no right or wrong answer to this question; it is as much down to the requirements of each company. Whilst it’s a must for public listed companies, for private owned companies it is usually driven by their size – small size companies with a revenue of around 10-20m USD would need a Financial Controller but not necessarily a CFO. Generally start-ups that require liaising with capital markets or private investors for Series A funding are better equipped with a CFO who is proficient at managing stakeholders, even if their revenue is close to zero.

When To Hire a Financial Controller

It is fair to say that all companies, irrespective of their size, will need Financial Controllers. In small companies, they will be the number one finance person, often managing the accounting department. In medium to large size companies they will likely be number two to the CFO or potentially number three if the company operates with a Group Financial Controller.

Financial Controller is probably one of the most advertised positions in senior finance appointments because there is a recognition that their skill level is a notch above a finance manager and it also has advisory skills responsibilities.

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When To Hire a CFO vs. Controller?

This is very much dependent on the financial appetite of the Board of Directors or business owners; the two paragraphs above have shown that it is pretty much down to what the business needs in terms of internal versus external exposure. All companies need a Financial Controller but not all companies need a CFO, especially in privately owned enterprises.

The need for the CFO, besides the level of revenue growth (as in the higher the revenue, the more likely one will need a CFO), will be pretty much driven by the level of external exposure and depth of financial strategies.

When it comes to effectively managing shareholders and stakeholders, a CFO will be better equipped at that than a Controller. However, as the business grows potentially in excess of 50m USD turnover, it may be appropriate to add an extra layer to the finance organisation with the appointment of a CFO.

What Size Companies Use a Financial Controller?

Unless an organisation is small enough to rely on external accounting firms, all companies have a need for Financial Controllers.

As mentioned earlier, sometimes this can be the number one position in finance, and at other times Financial Controllers will look after divisions, product lines, or geographies, especially in larger companies.

A Complete Finance and Accounting Department Through Outsourcing

In today’s environment and work from anywhere culture, if an organisation has a need for financial support but cannot afford it internally, it has the option of outsourcing accounting services. Such services vary from limited tasks such as bank accounts management and financial reporting to the extreme of outsourcing the entire accounting team, including an outsourced Financial Controller.

Outsourced Controller services have the benefit of providing a company with financial advice on an ad-hoc basis and it is usually a very favourable financial proposition. It is statistically proven that it does not harm a company to have a part-time Controller or even a part-time CFO.

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Skills Required

Despite the key differences between the roles, the skills required for both roles are very similar. The fundamental difference is the depth of skills and experience that an accounting professional can develop.

Leadership and communication are critical to both roles. As far as the CFO is concerned, these skills will be deeper as they will have to communicate externally, and their leadership skills go well beyond the finance organisation.

Both roles require an individual to have an accounting background and be financially-savvy as well as technology-savvy. Attention to detail and management of deadlines are greater in a Controller role vs CFO; however, the ability to make decision with imperfect information is a skill that belongs to a CFO.

Financial Controller vs. CFO Salaries

As expected, the salaries for a Controller vs CFO are very different; a CFO will on average earn 250-300k USD whereas a Financial Controller’s average salary will be more around 80-100k USD, although, a Group Financial Controller is expected to have a salary close to that of a CFO.

Both careers are extremely rewarding from a personal and financial standpoint with the emphasis that a Financial Controller is a necessary steppingstone to CFO.

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Similar posts:

How To Become a CFOHow To Hire a Financial Controller, What Does a Financial Controller Do in Accounting?

What is a Controller in Accounting?

31-03-2023

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