CFO vs. Controller: What's the difference?

A company’s finance team consists of numerous critical members, including CFOs, VPs of finance, controllers, financial analysts, accountants, and several more. As a result, it can be easy to confuse the different roles and be unsure about who is responsible for what.

However, as you build your business, it is critical to bring in the right members at the right time. That starts by understanding your company's needs, but it also means that you need to know the differences between the various roles and what each can provide for you. 

With that in mind, let’s talk about two complementary roles that are necessary for your company to thrive and grow: the CFO and the controller

What is a CFO?

The CFO is the highest-ranking member of your finance team. Many times second in command after the CEO, the CFO is responsible for a lot of the strategic activities that go on inside your company, especially the ones pertaining to finances, forecasts, returns on investment, and so on.

CFOs also play a significant role outside of the finance department. They are strategic advisors to the CFO, understanding the CEO’s visions and then using data to find the best way to make that vision a reality. CFOs also help identify and create strategic partnerships, understand business risks to mitigate them, and evaluate technology solutions that might be implemented company-wide. 

What are a CFO’s responsibilities?

If we refer to McCracken’s 10 pillars of finance, we can see the common areas of responsibility inherent in the CFO’s role, including:

• Controllership
• Financial planning and analysis
• Treasury and risk
• Strategic transactions, such as M&A, fundraising, and IPOs

Additionally, while a CFO may not be involved in the nitty-gritty parts of these tasks, they still have to oversee them and shore up any holes the company might have. For instance, if a small company doesn’t have an FP&A team, then the CFO will have to perform that role with the help of their controller. 

Nevertheless, the best use of a CFO is as a strategic advisor who helps plan revenue growth, makes high-level financial decisions, and represents the company to all external stakeholders. Part of that strategic role involves collaborating with other departments within your company to ensure that they each meet their financial goals, which we call “cross-functional engagement.”

Furthermore, the CFO has a fiduciary duty to the company as an officer. Put differently, the CFO can potentially be held liable if the company’s finances are not in order or are being intentionally misrepresented.

What is a controller?

A controller is typically the highest ranking accounting professional who oversees your company’s financial processes. They manage other accountants and are ultimately responsible for your accounting department. 

Accordingly, they ensure that every aspect of your business’s finances is both legally compliant and follows the industry’s best practices.

And given how critical and fundamental their role is, a controller is usually one of the earliest financial hires that a company will make.

A controller’s roles and responsibilities

Going back to McCracken’s 10 pillars of finance, a controller must own the controllership pillar fully, which includes tasks such as:

• Managing the company’s accounting processes
• Maintaining the accounting policies
• Overseeing the financial reporting
• Ensuring tax compliance
• Being responsible for internal reporting, which ensures that the C-Suite executives are making strategic decisions based on accurate data.
• Being responsible for external reporting to stakeholders outside of the company, such as auditors, creditors, and so on.
• Overseeing SEC reporting, especially if the company in question is public
• Developing and maintaining internal controls.

Another pillar in which a controller is often involved is enterprise governance. Not only do controllers work hard to uphold the ethical standards of a company when it comes to reporting its numbers, but they also play a huge role in managing plenty of external stakeholders, including the company board, outside investors, lenders, external auditors, and all the governmental agencies that might take an interest in your company’s activities. 

Over and above, a controller works alongside the CFO, helping them with countless tasks. For instance, a controller might collaborate with the company’s head of financial planning and analysis department, or FP&A for short, and help them produce forecasting models and budgets based on accurate financial data. 

After all, as Mike Eitler, CFO with more than 30 years of professional experience under his belt, once said:

“Some companies that are bad at forecasting are also bad at accounting, but all companies that are bad at accounting are also bad at forecasting.”

And if the company is small enough not to have an FP&A department, these projections and models will be created by both the controller and the CFO, with the CFO leading the charge.

Unlike a CFO, the controller is not considered a corporate officer. So, while they are a senior employee, they are not held liable the way a CFO is. 

The differences between a CFO and a controller

Based on what little we’ve said so far, you must have spotted several differences between the two roles.

That said, let’s dive a little deeper into what sets these roles apart.

The purpose of each role

Companies need controllers and CFOs for different reasons:

• A CFO makes strategic business decisions based on the data and financial information available to them. Accordingly, they work with different departments to optimize a company’s investments. Moreover, the CFO can be the face of the company in many cases, interacting with outside stakeholders, including banks, investors, and auditors.
• A controller is responsible for the accuracy and legitimacy of a company’s financial records. They provide the CFO with the information necessary to make those strategic decisions. Controllers are also the face of the accounting department to the rest of the company, educating them about the benefits of accounting and ensuring that accounting policies are upheld. Controllers report to the CFO.

The responsibilities of each role

Again, going back to the 10 pillars of finance, we can see the following:

• Given that they lead the entire finance department, CFOs are responsible for all 10 pillars. However, their time is better spent focusing on the strategic elements as opposed to the purely tactical ones that other finance team members can handle. Additionally, as one of the company’s corporate officers, the CFO has a fiduciary responsibility and can be held liable for the controller’s mistakes or misconduct.
• Controllers take ownership of the controllership pillar. However, they also strongly support other pillars, particularly those with regulatory components, such as enterprise governance.

The work style of each role

Seeing as each role has different responsibilities, it comes as no surprise to learn that these roles come with varying styles of work:

• CFOs are very strategic and innovative in their approach to their work. Additionally, they need to think in a high-level fashion and be comfortable with opaque situations and fuzzy thinking. And while they care about the the numbers being recorded in your books, they also care about the story these numbers are trying to tell. Part of understanding that story requires the CFO to look outside the company to understand market trends and their potential impact on your company. Over and above, CFOs need to be master communicators to be effective leaders to the company.
• Controllers tend to be meticulous. They understand that the devil is in the details and that accuracy is key so that others, including the CFO, may do their job. They are very process-oriented and always try to optimize how your company records financial transactions, i.e. set up internal controls. 

The decision-making process for each role

Even though both CFOs and controllers need strong analytical skills to do their jobs, they tend to apply them in different ways:

• CFOs tend to be forward-looking. They want to see how they can achieve the CEO’s vision and the company’s objectives. So, they focus more on how certain decisions might impact the company’s trajectory, which requires running scenarios and creating forecasts. 
• For the most part, controllers are backward-looking. They focus on past transactions and operations. If the company is having a problem balancing its books or reconciling reports, a controller tries to understand the source of the problem to fix it. Ultimately, they want the past to be accurately reflected in the numbers. 

You can think of it like this: The controller ensures everything that has happened is recorded accurately, while the CFO uses that information (plus market analysis, industry trends, etc.) to make decisions about where to take the company next.

The skills and education required for each role

Seeing as each role has a different work style and decision-making process, it stands that the skill set for being an effective CFO is different than that for being a controller:

• CFOs mainly come from one of two backgrounds: They can start their careers as accountants, which means they were probably a controller at one point and may have a CPA. Or, they can start in the finance world, such as in investment banking or corporate FP&A, where they hone their strategic skills before they go up the ranks. In either case, they must have a solid understanding of accounting and financial planning. Over and above, CFOs need to learn to be effective leaders, and part of that includes first-hand exposure to different parts of the business. 
• Controllers come from accounting backgrounds. They usually have accounting degrees and many are CPAs (Certified Public Accountants). Also, they need to thoroughly understand GAAP reporting requirements (Generally Accepted Accounting Principles), tax rules, internal controls, and when relevant, SEC reporting requirements. 

The tech solutions required by each role

With each role having different responsibilities, they also have different technological needs to be able to fulfill their duties:

• CFOs have a much more comprehensive view of the technology solutions used by a company. While they do care about the accounting software a company relies on, CFOs also concern themselves with a company’s financial planning software. They are also involved in widescale technological projects, such as ERP implementations. 
• Controllers are very close to the accounting software your company is using. They need to know the ins and outs of that software. They also appreciate financial management tools, such as account reconciliation software, billing automation software, and so on. In short, any tool that will make their job more efficient and reduce the likelihood of a mistake is valued.

The cost of each role

It should come as no surprise that the average salary for each role is different:

• A full-time CFO makes between $175/ hour and $350/ hour. Accordingly, their annual salary ranges between $364k all the way to $728k.
• While estimates may differ, controllers make, on average, somewhere between $50 to $80 an hour. So, that comes to an annual salary of $104k to $166k. 

It is worth noting that the variance in the salary of a CFO is contingent on a few things, including the size of the hiring company, the location, and the industry. For instance, a CFO hired by a public company in the tech space in New York can expect a larger salary than one working with a private company in the Midwest.

Also, for many smaller companies, the cost of a full-time CFO may be quite exorbitant, which is why a fractional CFO is a great option to gain access to high-level finance talent earlier in the life of the company.

The comparison summarized

All of the above points are summarized in the following table:

Examples of the CFO vs Controller’s Work

To better appreciate the difference between both roles, let’s look at a couple of hypothetical business activities and see how each contributes.

Fundraising

When a company is fundraising, CFOs and controllers play different yet critical roles:

• CFOs often lead the charge, engaging with prospective investors, figuring out the equity structure, and helping the company maximize its valuation.
• Controllers are responsible for empowering the CEO and CFO’s story with accurate numbers that show the company’s progression and that help make the case for the arrived-at valuation.

Developing KPIs

KPIs can be excellent tools to help a company gauge its progress towards its target. And seeing as controllers and CFOs have different goals, the way they set up KPIs can be very different:

• CFOs are leaders to both the financial team and the company at large. So, they set KPIs accordingly. On the one hand, they set objectives for the finance team and then develop KPIs to track the team’s progress. On the other hand, CFOs work with other department leaders to help them formulate KPIs for their respective departments. 
• Controllers are bound by the KPIs set by their CFO. But they also develop their own KPIs to measure the effectiveness of the internal controls they set. Moreover, the data generated by controllers is critical as it informs CFOs how the company is progressing towards the established KPIs.

Does your company need a controller or a CFO?

With all this said, many business owners might be uncertain whether their companies need a CFO or a controller.

To that end, here are some of the elements that you might want to take into consideration:

• The size of your company. As your company grows, its finances will get more complicated, necessitating more finance professionals to help you run the whole thing. That said, you will likely hire a controller before you hire a CFO. Most companies with annual revenues over $1M have a financial controller on the payroll, at least part-time. And when companies bring in something between $25M and $50M annually, they hire a full-time CFO.
• The requirements of external stakeholders. Many companies bring on a controller because their industry or investors require it. An important factor here is the company’s capital structure.
• The complexity of the organization. Not all accounting environments are created equally. Companies in certain industries such as SaaS or Construction may deal with complex accounting processes that require the early involvement of an accounting expert like a Controller or a Fractional CFO. 

That said, we also want to offer more concrete advice on when each role might benefit your team.

When would a controller be helpful for your company?

The biggest sign you need a controller is when you need to generate GAAP-compliant financial statements. Unless you have a solid background in accounting, it is advisable to delegate this to a controller.

Why not hire a bookkeeper to perform this role?

Simply, a bookkeeper will lack the expertise and experience to generate those statements reliably past a certain size and complexity.

We also mentioned that another impetus behind hiring a controller is company size, and here are warning signs that it is time to hire a Controller:

• The monthly close process taking more than 15 days 
• Basic accounting processes remaining undocumented 
• Existing bookkeepers or accountants becoming overwhelmed with transaction volume (often around 1,000 monthly transactions). 

Moreover, the need becomes more urgent when a company:

• has multiple revenue streams or business units 
• is seeking debt or equity financing
• Struggles because the CEO/CFO is spending too much time on accounting details.

When your company reaches that size, you want someone to help you figure out your company’s financial operations, which includes setting internal controls and monitoring them. 

Companies tend to hit this problem when they approach the $1M annual revenue threshold, at which point it is wise to bring in a part-time controller at least. 

When would a CFO be helpful for your company?

No business owner should wait until their business is hit with financial challenges to consider bringing in a CFO. Instead, hiring a CFO needs to be a proactive move. 

For instance, if your company is about to pursue aggressive growth, then a CFO can be critical. They can help with strategy development and enable you to identify opportunities you might have otherwise overlooked. 

Also realize that hiring a controller and asking them to play the role of a CFO can lead to challenges for the organization. Those roles are not interchangeable, and a controller most likely needs broader experience and expertise to function as a CFO. 

That said, one school of thought argues that you are better off hiring a CFO as early as possible.

How a CFO can benefit a startup?

Given their strategic value, CFOs can play a critical role for startups. For instance, they can help advise on how to disperse equity to new employees or how to best optimize the company’s tax strategies. Even during company formation, a CFO can advise on the best legal structure. 

Additionally, a CFO’s industry connections and network can be critical for a startup.

However, given that a startup’s needs for a financial professional are much more limited than that of a Fortune 500 Company, startups can get by on the services of a fractional CFO. For instance, a startup could initially engage a CFO for 1 day a week, and as the startup grows, the engagement could mature into 2 days a week, 3 days a week, and so on. 

Some controllers eventually become CFOs…

For many controllers, the role of CFO is the end destination. 

But to make the journey faster and more successful, they need coaching and guidance in developing strategic thinking skills, financial planning capabilities, and leadership abilities beyond pure accounting expertise. 

To become an effective CFO, controllers need to develop strong relationships and understanding across all business functions. This means:

• regularly collaborating with sales to understand revenue cycles and forecasting 
• working with operations on supply chain and efficiency metrics 
• engaging with IT on system architecture and technology investments 
• partnering with HR on compensation planning. 

To that end, controllers should actively seek opportunities to join key operational meetings outside finance, participate in cross-functional projects, and shadow different department leads to understand their challenges. 

This broader exposure helps them transition from being purely a financial expert to becoming a true business partner who can see how all pieces of the organization fit together and contribute meaningfully to strategic decisions

Second, controllers will need to work on their soft skills. This means becoming better communicators and leaders. They will also need to become more adept at managing conflict. Most importantly, they must learn to adopt a forward-looking mentality, which is key to the strategic responsibilities of a CFO.

Putting it all together…

While CFOs and controllers perform different functions, they complement one another: CFOs are the strategic fulcrums of their companies, whereas controllers provide CFOs with the needed ammunition to make those strategic decisions.

Given their different roles, CFOs and controllers also differ in the nature of their jobs and in how they approach the decision-making process. 

• CFOs are strategic, and controllers are tactical. 
• CFOs need to think about the future, but controllers are more concerned about the past. 
• CFOs are comfortable dealing with uncertainty and thinking in probabilistic terms, but controllers need precision and accuracy.

That said, it can be tricky for many business owners to figure out whether they need a CFO or a controller. And while we believe that a company of any size can benefit from the services of a fractional CFO, things are rarely so clear-cut.

So, why not learn more about what a fractional CFO does?

Check out our comprehensive fractional CFO guide and learn how one can add value to your business.