Role of a Financial Controller

Most people have heard of a CFO and a bookkeeper. If you are unfamiliar, CFO stands for Chief Financial Officer. Essentially, they are in charge of all the financial operations of a business. A bookkeeper on the other hand keeps the books in order and makes sure all the transactions get properly entered into the accounting software. There is a position that exists between these two important roles that is often misunderstood. That position is the controller.

This week, I want to touch on some of the key duties of a controller and how they can benefit a company.

Understand that the role of controller doesn’t have to be a full time position. It can be part time or even a position that is outsourced to a firm like ours. However, it is important to fully understand the role of a controller so that you can identify a need when it arises. Many times companies will hire a bookkeeper or a CFO when they really need a controller. Understanding the role can save you from over hiring a CFO or placing too much responsibility on a bookkeeper.

Internal Controls and Accounting Procedures

Given the name controller, its pretty apparent that a big part of the job is developing and monitoring internal controls and procedures. In any size organization, it is important to have internal controls in place to protect against fraud or other potential harmful situations. In addition, it is equally important to have fully documented accounting procedures in place so that everyone is clear on their roles and responsibilities.

Timely Monthly Financial Close

Closing the books each month in a timely fashion allows the business to make more informed decisions based on accurate information. The controller needs to review the books, create any journal entries needed and provide the management team with the Profit and Loss, Balance Sheet and Cash Flow Statements.

Compile Data Into Additional Reports

Once the financial close is complete, the controller will then prepare any additional reports that are required for the business. This might include things such as budget to actual, bench-marking, ratio analysis or job costing.

Oversee the Accounting Department

Typically, the controller has complete oversight of the entire accounting department. In a smaller business, this might just be one person but as the business grows, it is important to have one person who oversees the entire process.

Control Over Accounts Receivable and Accounts Payable

The bookkeeper or office manager is typically in charge of invoicing clients and paying bills, but as issues arise, the controller will step in and take charge. They will need to call on clients with overdue accounts and negotiate new vendor pricing if needed.

Manage the Budget and Forecast

The controller will be responsible for creating the budget and forecast each year. They will have to coordinate with the entire team to make sure  everything has been accounted for. Once these are created, it is their job to make sure the organization is following the budget and the forecast as closely as possible.

Coordinate With External Accountants

This may not apply to some organizations but most at least have an external tax accountant. The controller would be able to supply them with any reports they need and also answer questions as they arise in order to prepare the tax return. This would also hold true if the company needs audited financial statements.

Evaluate and Monitor the Financial Health of the Company

While the CFO is focused on the financial strategy of the business, the controller needs to constantly monitor the health of the company. If something doesn’t look right, they need to report it to management or the CFO and determine the next steps. Since they have their pulse on the details of the financials day in and day out, many times they are the first to uncover issues.

Assistance With Tax Filings and Compliance

The controller might not be directly responsible to prepare and file all the necessary tax filings, but they need to make sure that everything is filed in a timely fashion. This could include things such as payroll taxes, sales tax reports and business licenses.

Conclusion

As you move into larger companies, there may be many more accounting roles then the bookkeeper, controller and CFO. On the flip side, smaller companies may have 1 person fulfilling all 3 duties. Regardless of where you stand, it is important to understand where your company is at in its growth cycle and determine what roles need to be separated.

As a general recommendation, most small businesses should have a bookkeeper/office manager and a controller/CFO (most likely in an outsourced role). This is a great model to make sure everything is in order as well as to use your financials to promote future growth.

If you have any questions about the roles discussed above or what structure might best suit your company, feel free to reach out anytime.

Have a great weekend!