The Difference Between an Expert CFO and a Controller

Aug 29, 2024

The rise of the fractional CFO market has provided businesses, especially small to mid-sized companies, with access to high-level financial expertise without the need for a full-time commitment. However, with this increasing adoption, it becomes crucial for business owners to differentiate between an expert CFO and a controller who may be presenting themselves as a CFO. Here’s how business owners can identify the differences to ensure they hire the right financial leader. 

Understanding the Roles: CFO vs. Controller 

Before diving into the identification process, it’s important to reiterate the primary differences between a CFO and a controller: 

• CFO (Chief Financial Officer): A strategic leader focused on long-term financial planning, risk management, stakeholder communication, and overall financial health of the company. Your CFO is forward thinking and planning. 

• Controller: A tactical role concentrating on day-to-day financial operations, accounting, and financial reporting. Your Controller is reporting on the activities of the past. 

 

Key Indicators of an Expert CFO 

To identify whether a fractional CFO candidate truly possesses the expertise required, business owners should look for the following indicators: 

 

1. Can they demonstrate Strategic Thinking and can they show you Experience in delivering on it.

An expert CFO should demonstrate a track record of strategic planning and leadership. Ask about: 

• Past Achievements: Examples of previous roles where they contributed to significant growth, strategic pivots, or major financial restructuring. 

• Industry Knowledge: Deep understanding of the industry and market trends. They should be able to discuss how they’ve navigated industry-specific challenges in the past. 

2. Do they have Advanced Financial Skills, such as…

Expert CFOs have a broad skill set that includes advanced financial management. Consider: 

• Complex Financial Scenarios: Their experience with strategic planning, mergers and acquisitions, capital raising, and advanced financial forecasting and modeling. 

• Technology Proficiency: Familiarity with financial software and data analytics tools that enhance decision-making. 

3. Can they maintain Effective Communication with Stakeholders

CFOs need to engage with investors, board members, and other stakeholders. Check for: 

• Communication Skills: Their ability to clearly articulate financial strategies and performance metrics. 

• Relationship Building: Previous experience in managing investor relations and fostering trust with key stakeholders. 

4.Do they have acumen and understand Risk Management? 

A critical role of the CFO is to anticipate and mitigate financial risks. Assess their: 

• Risk Management Framework: Knowledge of risk assessment tools and strategies they’ve implemented to safeguard the company. 

• Compliance and Governance: Understanding of regulatory environments and how they ensure compliance within their organizations. 

 

Red Flags Indicating a Controller Acting as a CFO 

While controllers are vital for day-to-day financial operations, they may not possess the broader strategic capabilities of a CFO. Here are some red flags to watch for: 

1. Focus on Operational Tasks

If the “CFO” predominantly discusses daily accounting tasks, financial reporting, and internal controls without addressing strategic planning or growth initiatives, they might be more aligned with a controller’s role. 

2. Limited Strategic Contributions

A lack of experience in strategic decision-making or an inability to provide examples of influencing company direction can indicate they do not have true CFO experience. 

3. Narrow Financial Expertise

Controllers often have a deep but narrow focus on accounting practices. If the candidate lacks experience in areas such as high-level financial strategy, or providing insight which drives financial performance, they may not be equipped for a CFO role. 

4. Inadequate Risk Management Experience

Controllers may not have a robust framework for identifying and managing financial risks. A limited discussion on risk management and compliance can be a red flag. 

 

Steps for Business Owners 

To effectively differentiate between an expert CFO and a controller posing as a CFO, business owners can take the following steps: 

1. Conduct Thorough Interviews

• Behavioral Questions: Ask candidates to provide specific examples of past strategic decisions, risk management scenarios, and stakeholder interactions. 

• Scenario-Based Questions: Present hypothetical situations that require strategic financial thinking and assess their responses. 

 

2. Comprehensive Approach to Working with You

• Strategic Planning: Ensure they have experience in developing actionable annual plans. 

• Revenue Growth: Your CFO should collaborate with sales and marketing teams to create strategies for sales and margin growth, along with key performance indicators (KPIs) and leading metrics. 

• Systems and Processes: To mitigate risk and protect company assets, your CFO should have expertise in building financial operations, establishing banking relationships, reviewing legal contracts for financial implications, identifying and implementing necessary IT systems, and ensuring internal controls are scaled appropriately. 

3. Your Primary Financial Executive

• Catalyst to Growth: They should possess extensive experience in interdepartmental management and the development of financial levers, budgets, and goals. 

• Insight and Experience: Your CFO should provide not only financial reports but also insights and recommendations on best practices to inform decisions. 

• Resource Allocation: Beyond reporting, cash flow, and resource management, your CFO will collaborate with you, your banks, and other sources to secure the capital needed for operations and growth. 

• Profit Improvement: While cost-cutting is essential, it’s merely transactional. Your CFO should perform financial analyses to identify the highest-margin revenue growth opportunities. 

Conclusion 

Navigating the fractional CFO market requires a keen understanding of the distinct roles and responsibilities of a CFO and a controller. By focusing on strategic thinking, advanced financial skills, effective communication, and robust risk management, business owners can identify true expert CFOs who will drive their companies forward. Ensuring the right fit is critical for leveraging the benefits of the fractional CFO model and achieving sustained business growth.