As I near my second anniversary with B2B CFO®, I have certainly gained a heightened appreciation and understanding of the unique patchwork of businesses that make up the Rio Grande Valley economy. One thing that I have noticed that is of particular interest to me, is the lack of formality and specificity with which we use the terms “accountant”, “controller”, “CFO” and others in our region. This is due, in no small part, to the distance between the RGV and major financial markets, coupled with the relatively short time in which most businesses have evolved here in any field other than agriculture.
So, in order to help me help businesses, I felt some time and space should be dedicated to explaining the distinction between a CFO, a controller, and to a lesser extent, an “accountant” or “bookkeeper”. In simple terms a CFO is a highly experienced financial executive, who can help drive your business to greater profitability and end value using a variety of techniques and analysis to forecast and shape your financial path. This is different than your CPA or a controller. Although there are exceptions, most CPAs and controllers do not have CFO experience. “They report the news, they don’t forecast or shape the news.” The outside CPA, or a controller within your organization, may prove an excellent resource on taxes and accounting regulation, but they likely have little experience with running a company – other than a CPA firm. Terry Weaver of Chief Executive Blog explains, with respect to outside CPAs, “Secondly, it’s generally not their job, as they perceive it. If you hire them to prepare monthly statements and do your taxes, they actually believe you’re going to read (and understand) the monthly statements and that the data you gave them to prepare them was accurate. It’s like wondering why the scorekeeper at a football game didn’t call better plays.”
Another way to view this is to break down the roles between strategic and tactical. Strategic is defined as “relating to the identification of long-term or overall aims and interests and the means of achieving them,” while tactical is “involving or pertaining to actions, ends, or means that are immediate or short-term in duration, and/or lesser in importance or magnitude, than those of a strategy or a larger purpose.” That is, an accountant, controller or CPA generally has a tactical purpose of documenting and reporting on the transactions the business has engaged in, for purposes of immediate or short-term compliance with requirements of your bank, and governmental agencies, such as the IRS or Texas Workforce Commission. While a CFO will certainly be involved in that reporting process, his focus is on taking that historical data, evaluating the performance of departments or divisions in the company, and developing budgets, plans and models to either predict future performance of those units, or to evaluate and enhance their performance, with the purpose of achieving the owner’s longer term goals of growth, expansion, exit, etc.
Business Insider recently ran a nice graphic that distinguishes between the CFO (strategic) and controller (tactical) functions in a firm:
B2B CFO® provides strategic financial advice and consultation to small and middle market companies. Contact me to learn more.
For some additional reading on the distinction between CFO’s, controllers, accountants and CPA’s, these articles might be of interest: