CFO vs Controller: Understanding the Difference

For the lay person, there is often a lot of confusion around the differences between the CFO, or Chief Financial Officer, and the Controller. In fact, many organizations themselves do not even recognize the difference, combining the two into one role. Let us take a few moments to educate ourselves on the differences between the two.

CFO vs Controller: Understanding the Difference

What is a Chief Financial Officer?

A Chief Financial Officer, or CFO, is the financial leader of any organization. They are responsible for cash management, budgeting, internal controls, corporate credit and collection, auditing, financial planning and strategic planning. Their primary function is to be the big picture thinker – to be the forward thinking person. They look ahead with respect to the finances – they are keen on understanding the past financial performance and use this to assist in accurately guiding the organization’s financial future. The CFO position is usually part of advising the executive leader’s team or committee, and counseling on any key decisions that need to be made.

The CFO must be a strong communicator – able to get the message across to a multidisciplinary team and support or challenge decisions effectively. They are also seen in many organizations as the seller, both internally and externally. They are often tasked with the job of selling the company to investors, selling visions and strategies to staff or employees, and selling ideas or financial recommendations to the executive team. The role of the CFO may be fluid, depending on the size and age of the organization. At the beginning, the CFO may be more focused on making sure there is adequate capital for growth, and forecasting short term needs with long term goals in mind. As an organization grows, however, the CFO will become less involved with the day-to-day financial and accounting aspects and will work more closely with the executive team on growth, risk management and future visioning.

Controller

The controller is more involved in the hands on and day-to-day management of the accounting for the organization. They are involved in overseeing the tracking and reporting of financial resources and may have a large role in overseeing the entire department that looks after accounting, payroll, tax and finances. As the overseer of the department, their primary role is to maintain and operate the books of the business, to understand risk management, and to maintain standard operating procedures for all accounting and bookkeeping functions. More specifically, a Controller will implement accounting software and establish a chart of accounts; they will update financial models and analyze budget to actual activity; they will prepare said financial management reports in a timely manner for use by the CFO and management team; will handle basic Human Resource tasks; often will be involved in helping to recruit, build and manage the accounting and finance department; and will manage annual audit preparation and process. This will be done under the leadership or guidance of the CFO.

Interrelationship of the CFO and Controller

While it is very clear that in organizations where both positions exist, there is a set line of responsibility and often even hierarchy between these positions. Both roles need to work closely together, supporting each other to allow a business to make effective financial decisions. While a CFO will be the financial overseer and will be responsible for analyzing finance reports to advise the executive team. The Controller on the other hand, is responsible for ensuring that the reports provided to the CFO are both accurate and up-to-date. Without effective operating procedures in place and if they are not followed by the Controller, the value of the information being used by the CFO would be questionable. The CFO needs to be able to rely on the Controller to manage the books appropriately and allow for the CFO to generate forecasts, etc. The Controller creates the necessary reports and the CFO uses these reports, analyzes and reviews monthly P&L statements, balance sheets and cash flows to drive toward data-based decisions, allowing the executive team to understand and mitigate risk, make sound financial decisions and be aware of any potential impacts.

In the most simplistic terms, the Controller addresses the accounting of the organization while the CFO is focused on the full financial picture. One tracks and reports the activities of the organization while the other uses this information to help guide executive members in making sound financial decisions. One is a management role, overseeing day-to-day activities while the other is involved in leading the direction of the organization by providing financial information and risk mitigation strategies.