If the financial responsibility of your business is being left for you to sort through at 9 o’clock at night or goes to a family member so your business can cut down on overhead costs, you could run into financial problems. We see a lot of businesses who think completing just the bookkeeping and accounting each month is enough… but it’s not.
To see the overall financial standing of your business and get information that allows you to make critical business decisions, a controller is needed. Controllers manage a proper month-end close; help forecast cash flow, identity who your best customers are, and provide an accurate financial standing of your business.
Because each business has unique needs, one kind of controller does not fit all, so we are going to discuss factors you should consider when choosing a controller for your company. We have identified three ways your business can receive controller services: using your CPA, hiring an in-house controller, and outsourcing a fractional share of a controller.
Determining Factors to Consider When Choosing a Financial Controller
There are many variables that a business must consider before choosing a controller that suits their situation best. To assess your current financial standing, start by asking yourself these questions:
- How many transactions does your business have each month?
- What is the complexity of your month-end close?
- Do you need a controller for 40 hours a week?
- Is your controller doing the bookkeeping and accounting?
These questions can help you establish what type of controller works best for your business. By reading the explanations below of what a CPA, In-House, and Outsourced Controller has to offer, you can make changes to your current accounting department or hire a controller that can help you take charge of your financial intelligence.
How a CPA Acts as a Controller for Your Business?
When a CPA is acting as your controller, they provide your business with financial reporting, which consists of the balance sheet, profit and loss statements, accounts payable & receivable, and cash flow forecast. They typically don’t provide management reporting, which gives CEOs the ability to dive deeper when looking at their financials. The reporting they do provide is given at month-end rather than on a weekly/semi-weekly basis. Some CEOs see this as after-the-fact reporting, whereas others like that they only have to look at reports once a month.
Many CEOs see CPAs as a one-stop shop to get their bookkeeping, accounting, and controller needs all in one place. This is convenient, but it can become costly. To become a CPA, you need to invest in additional education and pass a rigorous exam that covers all areas of accounting, financial reporting, technical writing, business law, audit, and tax, which allows them to charge more than a full-time bookkeeper or accountant who works in-house.
What Does an In-House Controller Offer Your Business?
In-house controllers can also be costly, and not all businesses can afford to staff a non-revenue producing position at $80k-$150k per year. If you can afford this, the controller’s full attention will be devoted to just your business. They also might be part of your management team, helping make strategic decisions for the growth and betterment of the business.
If your business is inventory-heavy, an in-house controller can walk around the warehouse and assess your current state. Communication isn’t an issue with an in-house controller, as CEOs and owners can easily walk across the building to find out specifics on the company’s financial statements.
On the other hand, in-house controllers might not be up-to-date with the latest best practices. Things change, even in accounting and certainly in your business operations. You want a Controller who is invested in continual learning and committed to staying up-to-date with best practices in accounting and technology. If your controller is stuck in the past, it could mean you aren’t receiving the best advice on how to grow your business.
Another possible problem arises when your controller is sick or has PTO. Does your business have someone who can produce the work and reporting they are responsible for? If you don’t, you have a single point of failure. Your business might be able to operate without your controller for a couple of days, but if you can’t, in-house might not be the best option.
Outsourced Controller for Small and Medium Businesses
Do you want to save money without sacrificing financial intelligence? If your answer is yes, outsourcing your business’s controller function might be the answer. Outsourced controllers have become a popular alternative with small and medium businesses because owners can pick and choose what functions they want to outsource vs. keep in-house.
For instance, if you don’t need a controller 40 hours a week, outsourcing could provide a fractional share of a highly skilled Controller. If you only need 10 hours a week, the Controller can focus on the month-end close and produce a customized reporting package that helps drive your business.
There are some caveats to using an outsourced controller. Even though they can ensure you get a timely, accurate month-end close and a reporting package that helps you drive performance and profitability, they aren’t on-site and can’t make decisions on behalf of your business. They do provide the financials and reports that you or your advisors can use to strategically manage your business, but they typically won’t understand your business and industry the way an in-house controller might.
Outsourced controllers can’t take on any additional duties an in-house controller might be in charge of – like ordering supplies. There could be a wait time on something you want to be done immediately because outsourced controllers work with other clients and will need to fit in immediate requests when they have free time. Outsourced controllers aren’t right for every business, but they do allow small and medium businesses to pay a fraction of the cost for the same reporting.
Article by GrowthForce
