MaRS Library Accounting roles: Bookkeeper, controller and chief financial officer (CFO)
In a startup, most of the accounting and finance roles are filled by the owners or the operations team. As the business grows though, you may need one or more people who are dedicated to that function. Who do you need: a bookkeeper, a controller or a chief financial officer (CFO)?
What role does each one fill and when do you need them?
A bookkeeper can be an employee of the company, or a contractor. The bookkeeper is responsible for recording the financial transactions of a business (sales, receipts, purchases and disbursements). They ensure the accuracy of the journals and ledgers, calculate and prepare government remittances, and create internal financial statements for the company’s owners.
A controller manages and oversees the financial accounting and reporting of an organization. Depending on the size of the company, the controller typically has one or more accounting clerks reporting to them. The controller is involved in monitoring internal controls, analyzing the financial data for decision making, and liaising with external bankers, accountants and lawyers.
Chief financial officer (CFO)
The chief financial officer, or CFO, holds a strategic position, working directly with owners and their management teams to effect change in an organization. They actively assess and manage the financial risks of a corporation by looking at their current and future financial compliance and growth opportunities (e.g., markets, cost-benefit analyses, forecasting, corporate financing). Companies who cannot afford to hire a full-time CFO but need access to this type of expertise can hire a “virtual” or contract CFO as needed.
Key differences: Bookkeeper, controller and CFO
Bookkeepers tend to focus on a company’s historical results. Bookkeepers record past transactions and have very little influence on decision making or future transactions. Their breadth of experience is typically “transactional.”
Controllers focus on both the past and the future. They create accounting policies and procedures, oversee the financial reporting and interpret the data to create meaningful operational reports for the owners. Unlike bookkeepers, controllers have some influence over future transactions, provided they are given the authority to initiate expenses and set up internal controls.
Chief financial officers are forward thinkers. They work closely with owners and senior management to assess the business risk as well as the opportunities and threats in their market. CFOs provide oversight for accounting as well as tax and other regulatory compliance issues. They play a role in operations, research and development, contract negotiation, human resources, and sales and marketing.
Building your accounting team: When do you need a bookkeeper, a controller or a CFO?
Most companies will require a bookkeeper from their inception. The volume of transactions or activities will dictate whether the position is part time or full time.
The decision to engage a controller will be based on the following two factors:
- Volume of accounting transactions: As your company expands, you may need to hire multiple bookkeepers/clerks to record the accounting information. At this stage, a controller is typically hired to create a segregation of duties (for example, pertaining to the financial statements, accounts receivable, accounts payable and payroll). The controller then oversees the accounting function: building the accounting policies and procedures, implementing proper internal controls and creating meaningful financial and operational reporting for management and external users of the financial statements.
- Complexity of the business and its accounting transactions: A controller generally has greater experience than a bookkeeper in dealing with complex transactions such as foreign exchange, importing and exporting products, tax credit programs, stock option plans, and other tax issues.
Chief financial officer (CFO)
As the company continues to grow and become more complex, it may require a strategic partner at the management table. This partner, the chief financial officer, will bring the knowledge, leadership skills and expertise to advance the business (e.g., acquisition strategies, market expansion) or to prepare it for transition (e.g., IPO, succession, sale). A CFO will know the business’ financials and will use this information to optimize its performance and potential.