Depending on the size and the lifecycle of a business, there are multiple options for how to manage the company’s financial operations. There are various roles, both internal and external, that can help with the day-to-day as well as the reporting and strategic advisory.
How you structure the financial operations will depend on your goals, your available resources and the people you already have on staff and their expertise.
The goal is always the same however; take care of the nuts and bolts of bookkeeping and compliance AND get the financial intelligence – dependable month-end close, management reports and KPIs (Key Performance Indicators) – that provide true insight into your business and helps you make more informed strategic decisions.
In this article, we'll explore the differences between Bookkeepers, Accountants, Controllers, and CFOs. While each of them play a very important role in the financial management of a business, the actual responsibility of each role varies quite a bit from title to title.
Bookkeeping vs. Accounting vs. Advisory
Financial management includes bookkeeping, financial accounting and statements, management accounting and reporting, budgeting and projections, and strategic advisory – all of which forms the foundation of your financial operations and helps you reach your goals through informed business decisions.
The Role of the Bookkeeper
Bookkeepers are responsible for entering the data into the books and keeping the records up to date. Bookkeeping is transactional. It involves tracking all income and expenses, paying bills, invoicing, tracking payroll, etc.
The core of bookkeeping is data entry and coding, ensuring that the accounting system, spreadsheets and databases are populated with the correct data, coded to the right accounts so that bills can be paid and reports can be pulled.
Because bookkeepers are the source of the original data entry, they must understand how to code each transaction.
The Role of the Accountant
Depending on the size of the business, an accountant may do some of the same duties as a bookkeeper. Typically however, accountants have a four-year college degree and have a higher level of expertise and experience than bookkeepers.
Note, they are different than Certified Public Accountants (CPAs) as they have not completed the additional educational and testing requirements necessary for that designation.
Accountants typically oversee the bookkeeper and may perform billing, make general ledger entries, review accounts payable activity and reconcile payroll. A mid-level position in the accounting department, accountants report to accounting managers, company controllers or financial directors.
Accountants are the front-line people as far as the data and numbers are concerned. They are responsible for managing the company's accounts and ensuring proper reconciliation. Their goal is to produce schedules that support the final numbers for each account.
Accountants should reconcile every single balance sheet for every account each month, without question. This process is imperative if leaders want to have confidence when they review their income statements.
In short, accountants deal with regular upkeep and reconciliation of the accounts.
Accountants aren't usually focused on forecasting and strategizing. Rather, accountants' goals revolve around managing accounts, reconciling invoices, and handling month- and year-end close, ensuring that financial statements are accurate, meaningful, and timely.
The Role of the Controller
Think of the controller as the quarterback of the accounting function - overseeing accounting operations. He or she manages the accounting function, including ensuring month-end close processes and financial reporting functions are performed accurately and timely budget creation.
The controller is ultimately the person responsible for ensuring financial statements and balance sheets are recorded, reconciled, and delivered to the appropriate stakeholders. They oversee the accountants and bookkeepers and control the company’s cash flow - keeping tabs on how the money comes in and where it is going.
The controller must create the month-end closing schedule. He or she must communicate responsibilities and expectations to the organization so everyone understands their role. Once the data's being processed, it's up to the controller to ensure the accuracy and viability of each financial statement.
The controller ensures that the company’s accounting systems and processes comply with generally accepted accounting principles, help reduce risk and manage cash.The Role of the CFO
The Chief Financial Officer, or CFOs, primary responsibility is to be able to project the long-term financial picture of the company and help it thrive based on his or her analyses. While mostly forward looking, the CFO oversees, or if need be, performs the Controllership duties - ensuring accurate and timely reporting is available to the businesses’ key stakeholders.
CFOs also oversee investments, capital structure and debt and equity. In essence, they are responsible for both the current financial condition as well as the company’s financial future.
A CFO should be able to take the “Accounting Report Card” and turn it into a “CFO/CEO Scorecard.” A great CFO will be able to understand current strengths and weaknesses, efficiencies and constrictions of the business and how to capitalize on them. Using forecasting and modeling they provide scenario analysis to develop strategies to ensure the company’s success.The CFOs role in small business typically focuses on strategic advice and helping the business scale vs. investor relations and capital investments at larger companies. Responsibilities include:
- Strategic Advisory
- Financial Analysis
- Financial, Tax and Risk Strategy
- Interpreting Management Reports
- Mergers and Acquisition Strategy
- Interface with Financial Institutions
- Capital Investment
Many small business don’t require a full-time CFO but could use a fractional share of their services. Outsourced CFOs allow small business CEOs and executive teams tap into invaluable financial expertise as they scale their business.
Separation of Duties
It's important to have separation of duties to ensure confidence in the financial records.
A bookkeeper who's paying the bills should never be the person responsible for reconciling the bank account, nor should the person who's making the company's deposits have the ability to write off receivables or submit entries to bad debt.
An accounting system with solid checks and balances looks something like this:
- The bookkeeper enters the data.
- The accountant reconciles the work of the bookkeeper.
- The controller supervises the work of the bookkeeper and the accountant.
An accountant, by definition, usually has an accounting degree. On occasion, an accountant may be someone who didn't go to college but did work under a CPA for many years, learning the intricacies, ins, and outs of the field. Controllers almost certainly must have an accounting degree.
At GrowthForce, we understand that there is no one-size-fits-all solution when it comes to building a successful business. Some companies have grown to a position where a CFO is necessary to solidify long-term strategies. Smaller companies that are just starting out may do well with simple bookkeeping services.
Depending on your business lifecycle stage - We meet you where you are!