Financial Roles 101
Constructing Your Financial Dream Team
The various financial roles of a company can be confusing to some and overwhelming to others, especially for those just starting out in business. You may be asking yourself—What exactly is the difference between an accountant and a CFO? Aren’t they the same thing because both deal with money? And the answer is a resounding … No.
While the positions needed will vary greatly depending on the size and structure of a company, it’s important to understand how they build upon each other, particularly as the company prepares for growth. To that end, I thought it was time for a quick review.
Net Result: Transactional data entry
A bookkeeper represents the foundational building block of any business. If we were using construction terms, the bookkeeper is the concrete that needs to remain sturdy and level in order for the rest of the building to stand. Bookkeepers are responsible for recording financial transactions (sales, receipts, bill paying, financial coding) that occur on a day-to-day basis. This is the person who enters data and keeps records correct and up to date. A bookkeeper balances ledgers and ensures invoices are paid on time and the exchange of money is logged correctly. This attention to detail is vital for the successful growth of a company at every stage of development.
Net Result: Manages accounts, invoices, and financial statements
Similar to a bookkeeper, an accountant also deals with financial data and numbers. The difference, however, is often found in the level of trained experience. An accountant, as the title suggests, will have a degree in accounting. While the bookkeeper logs transactions, the accountant is in charge of balancing each company account. In smaller companies and startups, it is possible for the accountant to also be the bookkeeper, but as the company grows and evolves, it is important to separate these roles.
To continue with the construction analogy, the accountant would be the outer support structure of the building. An accountant looks closely at financial statements to make sure they stay accurate and up to date each month. They review data presented by the bookkeeper and analyze profits and losses within the company. They also may do taxes.
You may be wondering then if an accountant is the same as a CPA (Certified Public Accountant). While both deal with financial data, a CPA is an accountant who has met certain state licensing requirements. Think of it this way—while all CPAs are accountants, not all accountants are CPAs.
Net Result: Controls cash flow
We have the bottom support and the strong outer walls, so what’s next? Now comes the controller, who “controls” and oversees all financial accounting within a company. Think of the controller as the manager or direct supervisor of the bookkeeping and accounting departments. The controller can be thought of as the internal walls of the building that make sure the ground floor and outer walls maintain their connection and are able to keep standing and communicating efficiently. A controller generally oversees payroll, ledgers, cash flow, and financial statements.
You may be questioning why you would need to have a bookkeeper, an accountant, and a controller all within the same company. And, in some respects, you would be right. Smaller companies do not need each of these roles in place. However, as the company grows, it’s important to have a clear separation of duties and of financial checks and balances within an organization. The controller is there to double check the work of both the bookkeeper and the accountant and to provide a report of past and future spending to the CFO or owners of the company.
Net Result: Future strategic growth
Our construction is nearly complete. Next comes the CFO (Chief Financial Officer) or “roof” of the finance department. The CFO is part of the executive board of a company and has direct interaction with the controller. One of the primary differences between the CFO and other financial roles is that a CFO has business leadership acumen. With a strategic mindset, the CFO has the ability to extrapolate data to formulate a financial roadmap for the future of the business, including projections of company growth, opportunities, and risks.
The CFO understands the company’s strengths and weaknesses and knows how to use that information for these projections. For some companies, the CFO may be the owner (or one of the owners). For others, the CFO is a third party specifically hired to help an existing company navigate its financial future.
As a company grows from concept to seed to established, so does its financial needs. Make sure you start with a strong foundation, then build your walls to help support the roof. It’s important to remember that separating financial responsibilities helps provide a system of checks and balances. Then, the CFO can help ensure that the future of the company remains on solid ground.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.