If you are a CEO, I’m sure there is a cognitive bias when you think you need a CFO when a controller is the role your company is missing.
I’ve seen far too many trite comments by financial writers stating that CFOs focus on the future and controllers focus on the future. In some cases, that might be true. In some cases, that reasoning could be flipped. And in many more cases, both roles think equally of the past and the future.
Before hiring a CFO, especially if this is the company’s first CFO, write down everything required for this position. I’d start with work that slipping through the cracks or work you have to do yourself that a controller or CFO should be performing.
More than 90 percent of the time, your need will be for a controller, not a CFO. Does it matter? I’ll answer that later, too.
Start With a List of Requirements
One of the biggest mistakes I observe regularly is the CEO failing to create a simple checklist of the work to be done before hiring the needed person. The typical M.O. decides on the hiring role and immediately starts the recruiting process. Please do not do that. Slow down and write down the work that needs to be completed or the desired results.
Here is my simple checklist for the controllership position:
Accounting
- Timely and accurate financials on the first day of the month
- Streamlined processes for vendor payments and 5-minute order-to-cash automation enhancements
- GAAP-ready financials by the 20th of each January
- Tax-ready data for the external CPA by January 25th
- Upgrading staff that are more committed to the vision of the organization
Banking
- The ability to close on a bank revolver of any size (limited to our need)
- Upgrading our daily cash management process
- The ability to close on any term debt while streamlining the current process of acquiring debt
- The ability to negotiate rates for existing loans
Liquidity
- Automating three tiers of the rolling cash flow forecast while adding greater accuracy to the final four weeks (currently, we’re roughly 60% on those final four weeks dating back to the past 52 weeks)
- Automating the daily draws and pay downs with our bank
Financial Modeling
- Upgrade our financial modeling system to Anaplan
- Ability to access financial plan with newest actuals by the second of the month
- Continue to be the consultant and quarterback for the weekly updates to the financial modeling system. This includes coaching and mentoring the Director of Sales, the marketing manager, and the supply chain and logistics managers in regularly reviewing and testing the ‘key drivers’ in the model
Taxes
- Stay abreast of tax changes through quarterly meetings with the tax CPA at Forvis
- Update the unfunded tax liability the day after each financial close and report to all s-corporate shareholders that same day
CIP – Continuous Improvement Projects
- Be the lead in teaching everyone throughout the organization how to use XMR charts in all continuous improvement activities and how this tool plays a role
M&A
- We only average about one acquisition every three years. The controller quarterbacks all pre-diligence activities, builds and maintains the digital war room, builds and maintains the financial model, and supports the COO in post-purchase transisition
Financial Acumen and Literacy Expert
- Since this position will run the monthly huddles, this person will be responsible for finding ways to teach employees how to read 1) income statements, 2) balance sheets, 3) cash flow reports, 4) XMR-based scorecards, and 5) how to build departmental-centric driver-based models that can make a difference
Decide if You Need a Controller or CFO
As I look at the list above for a $75 million eCommerce company growing more than 10 percent annually, the role above has controller written all over it. All of the tasks are operations-centric, including the banking work.
However, a little transparency is needed. In my final three roles as a corporate controller, the list above was my list. And yes, controllers are underrated. They are not glorified accounting managers, far from it.
The question that every financial writer should be asking is when the shift to the CFO title occurred and why.
I’m not sure I can answer that question easily. But I can safely say that the CFO position is so watered down in small business America that it’s time to focus on the specific work to be done and worry about titles later.
How to Save $25k to $50k Annually
Earlier, I teased that the title greatly matters in your approach to hiring a senior financial leader. The decision could mean the difference between $25k and $50k.
Assume you have three controllers who see your ad on Indeed. All three have an average salary of $150k. All three are great controllers who keep getting better each year. They see your ad that will pay $250k for a CFO. All three are qualified for the role.
See where I’m going with this? Title inflation costs you at least $25k and probably far more. Your list reveals you need a controller, not a CFO. The controller copy for Indeed will reduce the cost of this FTE position.
The purpose of this essay is not to show you how to save money. My objective is to provide greater awareness of the capabilities of a good controller. A byproduct of hiring such a person is paying for only what you need, not more.