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Controller vs. CFO:

Understanding These Important Startup Financial Roles

As an accounting firm specializing in supporting startups, we understand the how important the roles of controller and chief financial officer (CFO) are to early-stage companies. While both roles are important, their roles and responsibilities differ significantly, so let’s look at how both roles function.

HEALY JONES
HEALY JONES
VP OF FP&A AT KRUZE CONSULTING

What Accounting Roles Do You Find at Startups?

Before we look at the different responsibilities that CFOs and controllers have, let’s review the major accounting roles and how they work together. Typically, startups begin with very basic accounting, since their bookkeeping needs aren’t complex. As the company grows and develops, additional higher-level accounting functions are added.

 

Role Responsibilities
Bookkeeper Typically a bookkeeper is a startup’s first financial hire, and can often be a contractor. Bookkeepers have accounting backgrounds and will record and maintain financial transactions, like expenses, and record those transactions in the general ledger.
Accountant Accountants have a CPA and may be full-time employees, or contractors who work with several companies. They oversee the financial records and will use the information in the general ledger to produce financial statements, like balance sheets and cash flow statements.
Controller Controllers are CPAs who often hold other financial qualifications, like an MBA. Controllers are senior accounting experts and oversee day-to-day accounting operations and are responsible for producing financial reports. In smaller companies, controllers may also help with financial planning and analysis.
VP of Finance A VP of Finance typically has a very deep accounting background, including both a CPA and leadership experience. VPs of Finance understand the company’s current and historical financial data, and, along with monitoring the company’s financial health, often manage risk and investment strategies.
Chief Financial Officer (CFO) The CFO is the senior executive responsible for overseeing the startup’s overall financial activities. The CFO reports directly to the CEO and the board of directors, and typically has significant strategic responsibilities, including financial planning and analysis (FP&A).

Controllers and CFO – Different Skill Sets

Both CFOs and controllers have different skill sets and normally focus on separate areas within a startup’s financial organization. While some of their responsibilities can overlap, particularly with early-stage companies, controllers are typically tactical (achieving concrete objectives in a shorter time frame), while CFOs are strategic (working to define a startup’s long-term goals).


  Controller CFO
Focus Accounting – the day-to-day flow of money in and out of a startup Finance – The overall planning for future growth including the management of assets and liabilities
Approach Tactical – focuses on current transactions and reporting Strategic – focuses on the larger context, like market trends, economic shifts, and financial planning
Responsibility Internal controls – the processes that ensure the integrity of accounting and financial information FP&A – the processes that help startups accurately plan, forecast, and budget to achieve the company’s goals and maintain its financial health

Controller: Protects Your Startup’s Financial Integrity

The controller serves as the custodian of financial integrity within a startup. They oversee day-to-day accounting operations and ensure compliance with regulatory standards. A controller’s key responsibilities include:

  • Financial Reporting: Controllers are responsible for preparing accurate and timely financial statements, including income statements, balance sheets, and cash flow statements. These reports provide essential insights into the company’s financial health and performance.
  • Compliance Management: Staying abreast of regulatory requirements is crucial for startups, since venture capitalists and other investors pay close attention to compliance. Controllers ensure that the company adheres to relevant accounting standards and tax regulations.
  • Internal Controls: Establishing robust internal control systems safeguards company assets and prevents fraud. Controllers design and implement internal controls to minimize risks and improve operational efficiency.
  • Budgeting and Forecasting: Controllers play a crucial role in the budgeting and forecasting process, providing insights to support strategic decision-making. By analyzing historical data and market trends, they help management develop realistic financial projections. *

Let’s discuss the pros and cons of making a Controller the first senior finance hire at your startup.

Controller Pros

  • A controller can wear many hats in the early days, taking on financial duties that will later be handled by more junior accounting staff
  • A strong controller hire early on ensures your financial reporting and compliance are buttoned up from the start
  • Hiring a controller first allows you to build a solid accounting foundation before turning attention to higher-level strategic finance
  • Controllers are generally must less expensive than a CFO, and often require a smaller to non-existent team to be productive

Controller Cons

  • Controller skills skew towards accounting rather than strategic finance, so you may still lack the high-level financial planning a CFO would provide
  • A controller may not have the experience or skills to effectively fundraise and interface with investors
  • Hiring a controller first may delay bringing on a CFO who can act as a strategic business partner to the CEO

Chief Financial Officer: Develops Your Startup’s Financial Strategy

While the controller focuses on maintaining financial integrity, the CFO takes a broader strategic approach to financial management. As the top financial executive, the CFO is responsible for shaping the company’s financial strategy and driving sustainable growth. Key responsibilities of a CFO include:

  • Strategic Planning: CFOs collaborate with executive leadership to develop long-term financial strategies aligned with the company’s goals and objectives. They assess market opportunities, evaluate potential risks, and recommend strategic initiatives to enhance profitability.
  • Capital Management: Raising capital is often a critical aspect of startup growth. CFOs oversee capital fundraising decisions, whether through equity financing, debt financing, or other fundraising avenues. They evaluate the cost of capital and assess the optimal capital structure for the company.
  • Cash Management: In an increasingly volatile business environment, managing a startup’s capital is paramount. CFOs identify and mitigate risks related to liquidity, currency fluctuations, interest rates, and other factors that may impact the company’s financial stability.
  • Investor Relations: For startups seeking external funding, maintaining positive relationships with investors is essential. CFOs serve as the primary liaison between the company and its investors, providing transparent financial reporting and strategic insights to instill confidence in stakeholders.

Ok, now let’s look at the pros and cons of hiring a CFO as your first senior finance professional.

CFO Pros

  • A good CFO should have experience with fundraising, investor relations, and making high-stakes financial decisions
  • As a strategic partner to the CEO, a CFO can provide the financial vision and leadership to scale the business
  • A CFO hire signals to investors that your startup has mature financial operations and is ready for growth

CFO Cons

  • CFO salaries are high and often unaffordable for early-stage startups on limited budgets
  • Hiring a Chief Financial Officer before basic accounting operations are in order can be putting the cart before the horse
  • CFOs generally require or want at least a small team to help them get stuff done
  • Finding a CFO who’s the right fit for an early-stage startup can be challenging, as many CFOs are accustomed to more mature companies

Contrasting Roles, Complementary Goals

While controllers and CFOs have distinct roles within a startup, their objectives are ultimately complementary. Controllers focus on ensuring financial accuracy, compliance, and operational efficiency, laying the groundwork for sound financial management. CFOs leverage this financial information to formulate strategic plans, optimize capital allocation, and drive sustainable growth.

Together, they are a team that propels startups towards success. At Kruze Consulting, we recognize the importance of these roles and are committed to supporting startups at every stage of their journey. Whether you’re in need of day-to-day financial oversight or strategic financial guidance, our team is here to help you navigate the complexities of startup finance.

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