Written by: Jeff Heybruck
We often encounter business owners trying to figure out their organization’s structure and which roles they need to hire or outsource. They might even be considering allowing a finance department employee to take on more strategic or supervisory finance responsibilities to save on the cost of another full-time hire.
Do I really need a Controller, or can my Bookkeeper do the job? Can’t my CPA take care of the same responsibilities that a CFO would?
While it may be tempting to let finance employees wear more than one hat, it is important to first understand the differences in day-to-day responsibilities and skillsets of CPAs, CFOs, Controllers and Bookkeepers.
CPAs, CFOs, Controllers & Bookkeepers – Defined & Differences Explained
Bookkeeper – “The Taskmaster”
Primary Function: Transactional
Reports to: Controller or Accounting Manager or Business Owner
A bookkeeper is in charge of day-to-day accounting tasks such as paying bills, posting accounts receivables, performing bank reconciliations and issuing 1099s. They are responsible for entering and coding financial data in the bookkeeping or financial management system.
Bookkeeping issues can often be amounted to a “garbage in, garbage out” scenario. Bad data being entered to accounts mean that the resulting reports analyzed and interpreted by leadership will not be accurate. A system of check and balances must be in place to ensure that accounts are reviewed and reconciled monthly.
Tip: There is a lot of bad bookkeeping out there. If your accounting team (or person) can’t answer your questions, things don’t tie together, or they can’t explain a certain balance, it is a good idea to get a second opinion. Ask your CPA what they think of your books. Ask them if they are clean. Ask how you compare to their other clients in the same industry. And listen. They might be saving you a big headache down the road.
CPA – “The Auditor or Tax Preparer”
Primary Function: Specialized Knowledge, Planning or Attestation
Reports to: CFO, Controller or Business Owner (smaller organizations)
A Certified Public Accountant (CPA) has, among other requirements, taken and passed the Uniform CPA Examination given by the American Institute of Certified Public Accountants. A CPA may be hired in-house by a company as a full-time accountant. However, it is common for CPAs to serve businesses as external independent consultants, supporting with financial audit services and preparing and filing business taxes.
CPAs may sometimes offer a breadth of services including investments, insurance and valuations. During the summer off-season some CPAs may take on bookkeeping work to stay busy. Conversely, during tax season, CPAs may have limited availability.
Many times we are asked, if I already have a CPA, why would I need Lucrum. It’s a fair question since the CPA is often among the first professionals hired by a new entrepreneur and holds a great deal of trust with that person. With the exception of some star performers, most public accounting CPA’s are focused on historical information, raw data, and regulations. A good CFO is driven by forecasts, financial information, and business needs.
CFO’s and CPA’s work closely together; they need each other’s skills sets. This is not to say a CPA can’t be a CFO; a lot are. But if someone is focused on being up to date on the thousands of tax laws out there, are they able to forecast cash flow, do a cost-benefit analysis for an acquisition, or handle a refinance? At the same time, most CFO’s aren’t up to speed on depreciation rules or state by state filing requirements; the CPA is.
Controller – “The Supervisor”
Primary Function: Supervisory / Department Head
Reports to: CFO or Business Owner (smaller organizations)
A Controller oversees and manages the accounting department – reviewing and reconciling accounts and providing financial reporting to management. The Controller is responsible for overseeing the company’s A/P, A/R, Payroll, ledger and more.
The Controller typically reports to and supports the CFO in providing budgeting and forecasting numbers. The Controller’s oversight and monitoring of the business’ finances gives the CFO confidence in the financial data as accurate – and thus, actionable.
Depending on the size of the organization, a Controller may perform some light bookkeeping and accounting tasks. In smaller organizations, a Senior Accountant may fill the Controller role, or the level of complexity may not warrant Controller-level supervision.
However, don’t assume in all cases bookkeepers or accountants should also perform Controller functions. For more complex organizations, it is risky to have the same individuals performing both the analysis and data entry and the review of that analysis and data. And definitely don’t fall into the trap of giving a Bookkeeper level person the title inflation of Controller unless they are actually qualified to do the job. We’ve seen “Controllers” who can’t answer simple debit/credit questions to ones who can’t reliably process payroll or complete a bank reconciliation.
CFO – “The Strategist”
Primary Function: Strategic Direction
Reports to: CEO or Business Owner (smaller organizations use outsourced CFO services)
While the Controller looks back at the numbers and performs analysis, the CFO is a forward-looking role focused on the strategic financial direction of the business.
The CFO is an executive who works to protect the overall financial health of a company. Duties include developing financial KPI’s for the business, financial analysis, market and competitor analysis, maintaining relationships with banks and shareholders, capital investment strategy, financial risk assessment, fundraising and financial projections.
The CFO depends on the Controller and Accounting Department to provide accurate numbers that they can use for forecasting and budgeting strategy, to ultimately reduce debt and build equity for the business.
Can my CPA Serve as my CFO?
You might have a longstanding, strong relationship with your CPA. Your CPA may have helped you to clean up your books and guided you through some of the most challenging years of your business.
However, it is not recommended to rely on your CPA for CFO-level responsibilities like strategic direction. Here are just a couple reasons why.
- Focus on Tax Law – If you don’t have a CFO or financial advisor, your CPA might seem like the next best person to ask. But many CPAs have a focus on tax law, meaning that this focus will color their recommendation to your business to try to improve your business’ tax situation. This financial advice may not be aligned with your business’ overall goals or may not take into account other factors that can’t only be learned through regular, consistent meetings. A business owner asking the CPA to do a one-off analysis may not receive a 360 degree view if he/she doesn’t think to tell the CPA every possible variable. Plus, may CPAs have limited additional capacity during tax season – and the strategic business needs run year round.
- Lack of “Front-Line” Business Experience – CFOs have business leadership experience. The ability to take financial data and translate it into an actionable plan for the business is a very different skillset than the management and auditing of financial records – where the CPA role spends most of their time.
CFOs may have guided businesses through mergers and acquisitions, raised debt while protecting existing stake of the business owners, created successful fundraising strategies, successfully resolved business cash flow issues, supported in presenting financial projections to investors and boards and more. Certainly some CPA’s have similar experience but it comes down to experience, repetitions, and focus. Think about it another way, do we really want the oil change place rebuilding our transmission? Why not- they both work on cars…
This experience in aligning financial direction with business direction is what the CFO can offer. If you have a vision for the direction you want to take your business, but need help aligning your finances to that vision – a CFO will set the business up for success.
While there is certainly both cross-over and collaboration between CPAs, CFOs, Controllers and Bookkeepers, each title plays a unique role in the financial organization and in ensuring leadership has access to accurate, real-time financial data to make important business decisions.
If you are in need of CFO-level financial expertise, you might be worried that you will not be able to afford a full-time resource.
Lucrum’s fractional CFO services offer access to highly qualified experts with the industry experience your business demands – available on your terms, without the price tag and commitment of a full-time hire. If you would like to learn more about how fractional CFO services work and can support your growing business, please schedule a free, no-commitment consultation with one of our CFOs.
Not sure that your business would benefit from outsourced CFO Services? Check out our blog for tips and criteria that you can use to evaluate whether it is the right time for your business to consider fractional CFO providers.