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Here are some things to think about as you consider your need
for FP&A advisory services.
Many small business owners just aren't sure if they need a CFO
or Controller, even part-time. A part-time or fractional CFO
or Controller is a necessity for business owners who are serious
about wanting to operate and grow their business into something
valuable and profitable.
What is FP&A?
Financial Planning and Analysis (FP&A) is the process of analyzing historical financial data and using that data
to plan for the future.
By using financial statements, modeling, and forecasting, I can give your business all the information you need
to make informed choices based on your goals.
Typically, my FP&A advisory includes the following four elements:
1. Planning and budgeting
2. Forecasting and modeling
3. Integrated financial planning
4. Management and performance reporting
These four elements all come from a company's Annual Plan.
If we look at the first two points, there’s one key feature about both to remember: they’re forward-facing.
While historically, accounting has been reporting on what has happened, advisory means reporting on what
may happen. Once we have that picture of a potential future, we have a starting point to help you navigate.
My FP&A advisory service does not mean running your business. I act as an advisor who provides information
and advice that helps you make decisions. The work I provide will be informed by the needs of your business
rather than me determining those needs.
Business owners look for advisory services for:
- Financial expertise -
With my training and prior experience, I can provide insights and recommendations with a deep
understanding of your needs based on your business and industry.
- Improved decision-making -
Rather than depend on intuition, FP&A advisory gives you the information
You need to speak in a language you understand to make educated decisions.
- An impartial opinion -
Sometimes, somebody from outside of a business can provide the best insights, as they are removed
from any emotions or biases.
- Saving time on understanding -
It's complicated to turn reports into knowledge without a lot of prior experience; an expert
who can summarize information concisely is invaluable.
- A tailored experience -
Part of my advisory service is refining what's reported so it's specific to your needs.
Some Definitions
- Descriptive analytics -
Descriptive analytics answer the question, what happened? The first part of advisory services is
providing a description of what has happened historically in a language that resonates with you.
- Diagnostic analytics -
Diagnostic analytics starts to get into the question of why. It's time to expand on what happened
with an explanation of why it happened and how it shapes future outcomes.
Both diagnostic and descriptive analytics fall into the bucket of historical information reporting.
- Predictive analytics -
Predictive analytics describes how what may happen is presented. Based on what has happened,
what will happen in the future? Predictive analytics is based on reports such as budgets and forecasts.
We need to set the status quo for the future before we talk about how to shape it.
- Prescriptive analytics -
Prescriptive analytics provides advice on what can be done differently to achieve a certain outcome.
This is where we dig into your goals and start mapping a strategy to achieve them.
Controller vs CFO: Which Does Your Business Need?
Does your business need a controller, a CFO, or both? Every business, at some point, reaches a stage where
financial management becomes too complex, and just getting the bookkeeping done is no longer enough.
Whether your business is navigating growth, preparing for an acquisition, or just trying to stay afloat
during challenging times, having the right financial leadership is key. Understanding the distinct roles
these professionals play can help you make an informed decision that best supports your business needs.
Overview of Roles
What is a Controller?
A controller is the financial executive responsible for managing the day-to-day accounting functions of a company.
Think of the controller as the head of the accounting department. Their primary job is to ensure that all
financial reports are accurate, comply with generally accepted accounting principles (GAAP), and are prepared
in a timely manner. Controllers oversee the work of accountants and bookkeepers, ensuring that every transaction
is recorded correctly and that the financial data reflects the true financial position of the company. Modern controllers
try to leverage as much automation as possible, such as bank feeds and other reconciliation tools, to close the books
as quickly as possible.
What is a CFO?
A CFO, on the other hand, is the top financial executive in a company. While the controller is focused on
accuracy and compliance, the CFO is focused on strategy and growth. A CFO’s responsibilities extend beyond
managing finances—they are also involved in forecasting, budgeting, investment decisions, risk management,
and strategic planning. The CFO advises the CEO and the board of directors on financial matters,
helping to shape the company’s future direction.
Key Differences Between a Controller and a CFO
Past vs. Future Focus
- Controller: The controller’s focus is on the past and present financial health of the company.
They ensure that all financial records are accurate and compliant with regulations and that
internal controls are in place to prevent fraud. Controllers are deeply involved in the day-to-day
operations of the accounting department, overseeing everything from payroll to accounts payable
and receivable. - CFO: The CFO, however, is more concerned with the future. They take the financial data provided
by the controller and use it to forecast future performance, guide investment decisions, and develop
strategies for growth. The CFO’s role is to look at the big picture, ensuring that the company’s
financial practices align with its long-term goals.
Hierarchy and Reporting
- Controller: Typically, the controller reports to the CFO. They are responsible for implementing
the financial strategies developed by the CFO and ensuring that all accounting practices are in line
with those strategies. In smaller companies, the controller may report directly to the CEO,
especially if there isn’t a CFO in place. - CFO: The CFO reports directly to the CEO and is often a key member of the executive team.
The CFO is responsible for all financial functions within the company, including those managed
by the controller. In addition to overseeing the accounting department, the CFO is also responsible
for financial planning, risk management, and investor relations.
Strategic Involvement
- Controller: The controller’s role is more operational. They implement the financial strategies
set by the CFO and focus on the execution of those strategies. Their primary concern is ensuring
that the company’s financial data is accurate and that all financial operations run smoothly. - CFO: The CFO is involved in setting the financial strategy of the company. They are responsible for
developing long-term financial plans, setting budgets, and determining the best ways to allocate resources.
The CFO’s role is to guide the company’s financial strategy, ensuring that it supports the company’s overall
business objectives.
Risk Management
- Controller: The controller manages risk by maintaining internal controls, ensuring compliance with
financial regulations, and preparing accurate financial reports. Their role is to minimize risk by ensuring
that the company’s financial practices are sound and compliant. - CFO: The CFO takes a broader approach to risk management. In addition to ensuring compliance
and accuracy, the CFO also manages market and operational risks. This includes everything from
managing interest rate risks to ensuring that the company is prepared for potential economic downturns.
The CFO’s role is to ensure that the company is financially resilient and capable of weathering external threats.
Financial Reporting and Analysis
- Controller: The controller is responsible for producing financial reports that provide a snapshot of the
company’s financial health. These reports are used by management to make operational decisions and
ensure that the company is meeting its financial goals. - CFO: The CFO uses these reports to make strategic decisions. They analyze the financial data provided
by the controller to identify trends, forecast future performance, and guide the company’s financial strategy.
The CFO’s role is to turn financial data into actionable insights that drive business growth.
Communication and External Relations
- Controller: The controller primarily communicates with internal stakeholders, including the CFO
and other members of the management team. Their role is to ensure that the company’s financial data
is accurate and that all financial operations run smoothly. - CFO: The CFO, on the other hand, communicates with external stakeholders, including investors, analysts,
and the board of directors. The CFO is responsible for presenting the company’s financial performance
to the outside world and managing investor relations. Their role is to ensure that the company’s financial
strategy is aligned with the expectations of external stakeholders.
When to Hire a Controller vs. a CFO
- Low-complexity environments: Regardless of size, if your business is in a stable industry, with predictable
revenues, and you don’t have lenders or investors and don’t plan to grow by more than 5%/year, you might
start with a controller to handle your day-to-day financial operations. A controller can ensure that your
financial records are accurate and compliant, providing you with the financial stability you need to sleep well at night. - High-complexity environments: As your business grows, you may find that you need more than just
accurate financial records—you need a strategic plan for the future. This is when it’s time to bring on a CFO.
A CFO can help you navigate complex financial challenges, manage risks, and guide your company’s growth.
How Controllers and CFOs are Complementary Roles
Controllers and CFOs work together to ensure the financial success of a company. While the controller focuses
on accuracy and compliance, the CFO uses that data to make strategic decisions. Together, they ensure that
the company’s financial practices support its business goals and long-term growth.
Conclusion
Understanding the differences between a controller and a CFO is crucial for any business looking to grow
and succeed. While both roles are essential, they serve different purposes and are necessary at different stages
of a company’s development. By assessing your current needs and future goals, you can determine whether
you need a controller, a CFO, or both. If your business is growing but not yet ready for a full-time financial officer,
a fractional controller or CFO, or even a part-time accounting manager might be the perfect solution.
Special thanks to Bob Wang, owner and CEO of Tee Up Advisors, a Fractional CFO firm based in the Greater Sacramento, CA area.
Service Levels & Pricing
- Accounting Manager:
If you don't believe the level of your need rises to that of a fractional CFO or controller, what you may need
is a part-time Accounting Manager, someone to make sure all of the bank and credit card accounts,
accounts receivable and payable have been reconciled, and transactions have been properly recorded.
Someone to prepare financial statements for management review and to close the books. I also provide
this level of service, which typically costs anywhere from $750 to $1500 a month. - Controller:
As your fractional controller, I would provide all of the services of an Accounting Manager above, as needed,
as well as a historical analysis of your financial statements to be discussed with you in periodic remote meetings.
This level of service typically costs anywhere from $1,000 to $2,000 a month. - CFO:
As your fractional CFO, I would provide all of the services of an Accounting Manager and controller above,
as needed, as well as ongoing financial planning and analysis of your financial statements, including budgets
with variance analysis, forecasts, and projections, cash flow analysis, use of dashboards, financial modeling,
KPI and ratio analysis and strategic planning with you in regular remote meetings. This level of service typically
costs from anywhere from $2,000 to $3,000 a month.Please contact me at (801) 918-7545 to discuss how I can help you move your business forward and
help you make more money and achieve your own financial plans.
