Today I’m going to decode the roles of bookkeepers, controllers, and CFOs to help business owners like you navigate the world of finance. I’m self-aware, and I know that most of my clients severely dislike anything to do with accounting and tax, and yet good accounting, in a lot of cases, is your path to salvation. Let’s explore the misconceptions around these roles and why undervaluing your accounting department can hinder business growth. I’m your host, Clayton Achen, and today we’ll go from bean counters to strategic partners. Let’s dive in!

So first, why is this topic so important? Over and over again we encounter entrepreneurs with growing companies that come to us with the expectation that they can spend $500 or $2000 on monthly bookkeeping and that they will have all the information that they need, information that they have been desperately craving, to run their business. Often, these entrepreneurs have recently left a bookkeeper or bookkeeping firm in the context that they were underperforming. When we start to peel away the onion, we realize that this often isn’t the case, it’s just that the company has not placed enough value on, or properly built, an accounting department that can keep up with the growth of the company.

Many business owners believe that their bookkeeper can handle all financial tasks and that investing in an accounting department is simply a cost to be reduced. But this perception quickly changes when they encounter financial challenges. Whether it’s producing financial statements for a bank loan or understanding why cash is tight, business owners often find themselves frustrated and unable to get a handle on what’s happening within their own company.

It’s important for business owners to understand that successful businesses typically allocate around 2-3% of their sales revenue to their accounting function. At GURU by Achen Henderson, we have seen over and over again that successful companies focus a a lot of energy on their accounting departments and understanding their numbers. This is one of the fundamentals in business that every business owner can get right, but which an overwhelming majority of entrepreneurs fail at – but definitely not the successful ones. That’s why we offer not only bookkeeping and CFO services but also fractional controllership services. Today, we’ll shed light on the differences between bookkeepers, controllers, and CFOs and clarify their distinct roles within your business.

I’m going to record separate podcasts of the real-life benefits of bookkeepers, controllers, and CFOs and how any small business can access these services on a fractional, or part-time basis. For now, though, I’m simply going to dispel the myth that your growing company only needs a bookkeeper and, hopefully, help you understand why you are frustrated with your accounting function. Here’s a secret: most of the time it relates to an under-resourced accounting department that you pay too little attention to.

Let’s start with bookkeeping, what, specifically, is bookkeeping? Bookkeeping is the process of recording and processing all transactions that flow through your business. This typically includes recording expenses, entering sales, and reconciling accounts. This is all basically “accountant speak” for “record historic data in a company’s books and records to ensure that the books and records reflect the financial position of the company at some point in the past.

Bookkeepers often encounter roadblocks to achieving this task such as unknown transactions and missing information needed. Ensuring that bookkeepers get this information in a usable manner and on-time is the controller’s responsibility. While a bookkeeper may be able to prepare books that are sufficient to satisfy the tax authorities, and produce basic financial statements, the information that they produce may not be of any use to management in the context of making strategic decisions. It’s important to note that bookkeepers are not responsible for tasks such as chasing receipts, fixing breaks in the accounting system, drafting invoices, collecting accounts receivable, paying accounts payable, running payroll, or making tax payments.

While many small business owners expect that these responsibilities should fall on the bookkeeper, it isn’t what most bookkeepers are good at, which leads to friction and failure all the time. Instead, these responsibilities fall under the purview of the controller.

Controllers ensure the smooth functioning of your business’s accounting system. It’s not about entering data accounting software; bookkeepers excel in that area. Controllers focus on the overall efficiency of your company’s operations and the timely gathering and preparation of financial information. They help answer crucial questions, such as whether there’s enough cash in the bank to cover payables and payroll, if customers are paying on time, and how the business is performing according to its strategic goals. Controllers will oversee accounts receivable, accounts payable, expense reporting, inventory management and payroll – and they will design and insert systems or “accounting controls” to ensure that everything runs smoothly. Controllers play a vital managerial role, ensuring that the company meets its obligations and objectives.

The third role in this accounting trifecta is the CFO. The CFO’s role is highly strategic and starts with understanding the goals and objectives of the organization, and then working with the other senior leaders in the organization to develop strategies to achieve the company’s mission. On the financial side CFOs engage in tasks like budgeting, forecasting, and Key Performance Indicator (KPI) tracking, and provides that data in a digestible format to the company’s decisions makers – which in private company land is often the owner-manager.

On the non-financial side, the CFO will marry things like web-traffic, customer satisfaction results, warranty claims and delivery times with the financial data in simple reports. This allows the business owner to make decisions based on data, rather than what most business owners make decisions on: emotions and feelings. Because the Controllers oversee the bookkeeping function and bookkeepers provide data to controllers and CFO the accounting trifecta is highly integrated and highly collaborative.

That’s why GURU by Achen Henderson focuses so hard on good clean bookkeeping, it all starts with data. We then layer in fractional controllers and CFOs for companies that have either outgrown their bookkeeping department and/or are hungry for growth and are willing to invest in their accounting department to see results faster.

It used to be that only huge companies could afford Controllers and CFOs, however technology has made it possible to tap into these resources on a part-time or ‘fractional’ basis. Be careful though, as the ‘fractional’ space has become quite noisy in recent years and not all business ‘consultants’ are qualified to deliver the results your company needs. It is important to properly vet these folks, or work with a firm, like Achen Henderson, who has already done the vetting for you.

To summarize, bookkeeping focuses on transactional data processing and reporting historic performance. Some bookkeepers may handle certain controllership tasks; but be careful not to put too much on your bookkeeper. Controllership is primarily about managerial oversight and ensuring that the accounting system is functioning properly. On the other hand, CFOs take a strategic approach by compiling data from various sources within the company, including accounting data, to evaluate performance and help you make more informed decisions that align with the company’s goals and objectives.

At Achen Henderson, we’re committed to supporting your business growth by offering a comprehensive range of financial services. Our team now includes fractional controllership services, ensuring that you have the expertise and support to navigate the complexities of financial management. Remember, investing in your accounting department is an investment in the success and stability