As a small business grows from a single person sole proprietorship to a multi-national corporation, the needs of the company will grow and change.  In the beginning of the company’s life cycle, growth is driven by the vision and talent of a small group of people, either the owner or an inner circle of similar-minded individuals.  Eventually, the size of the company will become too much for the owner to manage alone.

Owners, keep yourself focused on your business, not drowning in organizational routine.

If an experienced management team is not brought on board to take care of the day to day operations needs of the business, then the owner will become chained to the monotony of meetings, reports, and organizational routine; trapped in the same prison that they sought to free themselves of when they went out on their own.  Without the management team, the owner will neglect the health of the company and eventually, the company will implode from unnecessary exposure to risk, fraud, changing legislation, stagnated ideas, or costly business decisions.

Change takes time.

The company does not need to transform overnight from a haven of creative energy to a cubicle of bureaucracy.  Controlled growth with trusted advisors can allow the company to thrive and expand healthily if the head of the company recognizes the need for consistency and exceptionalism in the company.

At first, the owner might be able to perform the accounting functions for the company.  As revenue and clients increase, the owner can hire other staff to help with sales and the management of processes and other staff.  As the business continues to grow, the company can hire accounting staff and then either hire or promote an accounting manager.  The accounting manager can then evolve into the role of controller for the company with the right training and experience.  The focus of the controller is on implementing the checks and balances needed in a company to ensure that the accounting information is timely and correct.  The controller will make sure that policies are in place to protect the assets of the company and that the financial statements are prepared in accordance with generally accepted accounting principles.  Sometimes there is not a clear choice for a controller within the company, and while the owner might like the idea of promoting the long-time internal account to the position of the controller, it would be best for the company if an experienced controller from outside the company was brought in to join the team.

The difference between a controller and a Chief Financial Officer (CFO).

The role of a controller and Chief Financial Officer in small businesses are often confused with one another even though they serve different functions and provide different value to the company.

  • A controller is the head accountant focused internally on the company whereas the CFO is a businessperson with a background in finance.
  • The CFO will provide a forward-looking, analytical, and wholistic interpretation of the financial data to help the executive committee see how the company is performing in the pursuit of the company’s growth goals.
  • Both roles are critical to the success of the company, yet both are needed at different stages of the business life cycle.

Bringing on a CFO without having a controller in place will not provide the CFO with the structurally sound financial information needed to accurately measure the health of the organization.  The wrong decisions could be made from bad information.  Making a controller stretch into the role of the CFO would not provide the company with the expertise needed to take advantage of the right financing options or analysis of market trends to take full advantage of the company’s financial assets.

Hiring the right controller and the right CFO, at the right time, is an important decision for a company and can be a costly mistake.  Fortunately, a CPA firm can advise on who to hire for the right position at the right time, and if need be, can step in to perform the role of either until the company can find the right person for the job. 

Outsourced CFO services might really help your company, too.

CPA firms are transitioning from simple tax compliance and assurance services firms to consulting and business advising firms. Able to be with the owner from day one, the CPA firm can expand and grow the accounting and advising services to match the life cycle of the business. The owner does not need to worry about hiring the right individual for their accounting needs when they have a firm of experienced accounting and business consulting staff on hand ready to work on a project by project basis.  This allows the company to invest in sales and growth in the crucial early days of the company where cash flow is king.

As the business thrives, then the CPA firm can advise on who to hire for the internal accounting staff positions and make sure that the new staff are trained on accounting methods specific to the company’s needs and industry standards. The CPA firm can help implement controls for the company to protect its growing assets and when the time comes, help the company select a controller from within or search for one from without.

With a solid management team now in place, and an experienced, quality controller, the company and the CPA firm can look to the future growth and success of the company.

Sam Shafer is a Senior Consultant at Abacus CPAs, LLC.  Sam specializes in business and income tax preparation and has five years of experience in public accounting.  He is passionate about providing the best tax advice to help people achieve their business and life goals. Sam is terrific at juggling rapidly changing priorities, which makes him flexible with a practical bend.

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