When does your business need a controller, CFO or CPA?

By: David Rudofsky

Ask a small business owner whom they’d most like to hire next, and chances are they’ll say a sales or marketing person. Everyone’s looking to boost their sales, right? Further down the hiring wish list is a more experienced bookkeeper or a chief financial officer. But that could be a big mistake. The right accounting and finance team can provide you with the numbers you need to set a budget, estimate next year’s sales revenues, decide whether to invest in an advertising campaign, put together a financial statement that will wow lenders or potential investors, and much more.

Without the right financial professionals, companies can struggle needlessly. Many good businesses go through tough times, and even go out of business, because cash flow wasn’t properly projected and managed. Business owners who don’t have the proper support and assistance when they review financial results are unable to see if any operational changes would help. Would changes in pricing, product line, capacity or sales channels make your business more profitable? A savvy controller or chief financial officer can help you decide.

If your company’s accounting and finance team is understaffed, take heart. Here is a simple guide to knowing what to expect from your existing staff, how to add accounting professionals to your team at the right time and how to outsource the finance work when you don’t need to hire.

Start with your bookkeeper. A typical bookkeeper will process your bills and prepare invoices, as well as do bank reconciliations. One alternative to hiring your own is to use a bookkeeping service, or to do it yourself (the latter is recommended only if you have a thorough knowledge of accounting and bookkeeping). The decision whether to hire a bookkeeper or to use a service comes down to a few factors, including cost, the degree to which your invoices and bills need close scrutiny and your ability to oversee the bookkeeper. A “full-charge” bookkeeper is more likely to be capable of supporting a budgeting/forecasting process, running accounts receivable/payable aging reports and having the financial literacy to interact with the organization’s outside accountant.

A controller oversees the accounting department and can relieve the business owner of some of the financial duties (such as cost controls, check signing and preparing budgets) as the business grows.

Typically, chief financial officers are found only at larger businesses. But the owner of a small business sometimes needs some-one with these skills providing advice that transcends accounting and gets into broader business issues. Even if you can’t afford a full-time CFO, there are experienced individuals and firms avail-able to help as interim CFOs or to take on selected projects. The accountant complements the bookkeeper’s efforts to generate monthly profit and loss statements. Often the accountant is the one that makes adjustments to the income statements and balance sheets that are produced by accounting software programs.

The accountant would also conduct the financial audit or review that lenders require, as well as preparing the business tax returns. Some CPAs also have the business acumen and time to advise an owner on strategy, but many do not. Whether or not your CPA can provide financial advice on things that transcend accounting and taxes (for example, deciding whether you should hire the “A” sales person at $75,000 a year or the “B” sales person at $55,000 a year) depends on their broader business knowledge. Some can provide such valuable input; others aren’t qualified to do so.

The table located below provides a quick reference to the typical duties of different members of a company’s financial team. Most importantly, business owners need to have a minimum level of financial literacy themselves. According to Beth Polish, CEO of Critical Junctures Group, a consulting firm, “It’s all meaningless unless the owner/CEO understands the numbers and is willing to use them to make changes in the business. Too often, the monthly numbers just get shoved into a folder, when they could be used to take control of the business. There has to be a partnership between the person who prepares the numbers and the CEO to keep the numbers from becoming a mystery.”

The Players’ List Accounting and financial professionals at all levels are indispensable to a small business owner. Below are the typical duties of different positions, and the size at which a company tends to need to fill each role. Note that dollar levels are general and are a function of affordability, not need. For example, a company with smaller sales than listed here might need a controller if it routinely had complicated expenditures or a Chief Financial Officer if it had intricate financing needs.

This article was published originally in The New York Enterprise Report.