What Does the Controller Do?

The Controller is a nearly unheard of role in the startup and small business community and is often confused with the role of an accountant. Even CPAs often look down at the Controller position as an exceptionally boring role, but that’s because they don’t understand what a good controller is supposed to do.

The Big Picture


Controllers are typically thought of as the ones to manage cash, ensure bills and invoices are paid, and generate financial statements. These indeed are exceptionally boring tasks. But they should be mostly done by the accountant with the Controller supervising and managing all of it.

However, the Controller is responsible for executing on one of the most vital long-term finance tasks for any business: Building and Optimizing the financial infrastructure. Every business, regardless of size, has a financial infrastructure. It’s an entire environment of intertwined systems and processes that ensure the financial operations are running smoothly.


The Responsibilities


The responsibilities of a Controller  can be broken down into a few general categories:
  • Management of People
  • Building & Optimizing the Financial Infrastructure
  • Financial Reporting

MANAGING PEOPLE

The accounting and finance department in the business will usually have Bookkeepers and Accountants under the supervision of the Controller. The CFO has ultimate supervision of the entire department, but the management of the day to day lies on Controller’s shoulders. 

BUILDING AND OPTIMIZING THE FINANCIAL INFRASTRUCTURE

What’s a Financial Infrastructure?

The Financial infrastructure is an entire environment of intertwined systems and processes that ensure the financial operations are running smoothly. Every business has a financial infrastructure, they evolve organically because they’re absolutely necessary. Think of paying bills, getting paid by customers, analyzing performance, planning for the future etc. 

Why is it relevant?

Systems and Processes are forced onto the business out of necessity and, without proper design and planning, they end up to be mixture broken systems, inaccurate and inconsistent data and barely existing processes. This happens because there’s no coherent plan for a well-functioning financial infrastructure and as people address problems on the spot rather than anticipating and solving for them in advance, the result is a mess of broken systems and processes. 

What’s the Controller’s Role in it?

The Controller and the CFO together plan and design the financial infrastructure. The CFO takes a high level management role in this process while the Controller is the one to do most of the tangible work such as designs, timeline, functionality and general execution. 

How Does it Work in the Real World?


Deployment of new systems and design of new processes are usually one time large projects that occur frequently in the early days of a business (or during restructures) and less frequently as the business becomes more established. 

However, systems break, become obsolete and malfunction sometimes, especially as the business evolves and grows. The controller handles the management and optimization of these systems to ensure that they are functioning well and evolving at the same pace as the business. Processes and procedures face the same problems as the business evolves and the Controller is responsible for continuous management and optimization of these processes in the same way as the financial systems. 


FINANCIAL REPORTING

What Exactly Do You Mean by Financial Reporting Again?


Financial Reporting is the process of generating financial statements and reports for use by management in making decisions as well as investors, banks, and other parties that evaluate the creditworthiness and opportunities of the business. 

Believe it or not, making sure the financial statements are accurate and correct isn’t so easy. The company is expected to report financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). GAAP is a confusing tome of industry guidelines on how accounting should be done in certain situations and transactions

What’s the Controller’s Role In Financial Reporting?


CFOs usually rely on a knowledgeable Controller (ideally with a CPA license or equivalent level of knowledge) to manage this because it becomes overwhelming and time consuming very quickly.The Controller needs to be very knowledgeable in GAAP and ensure that the accountant is doing everything correctly to be compliant with it. 

It’s preferable to have someone with a CPA license or equivalent knowledge take the Controller function because CPAs are trained in GAAP, Tax, and Management. Despite what most people think, CPAs do more than Tax and it takes a combination of education, experience, and hard testing to become a CPA. 

How Do Startups Approach the Controller Function?

Startups usually can’t afford a Controller, so they opt for a combination of a CFO and an Accountant. Or if they’re really strapped for cash, they just hire a bookkeeper. This strategy is often fueled by the misconception about the role of a CFO and Controller and unfortunately it results in an environment where the CFO is overpaid to do work that they are overqualified to do.

The best strategy to build a highly functioning finance team and infrastructure is to employ a combination of outsourcing and in-house employees. 

The key is to start in-house hiring at the bottom of the skill level and move up. This way the cost is lower and you don’t end up overpaying in the long term