Is a Fractional Financial Controller Right for Your Business?

As businesses grow, their financial needs often become more complex, requiring expert management and strategic oversight. For many companies, especially those in the early stages or experiencing rapid growth, hiring a full-time financial professional may not be feasible. This is where a fractional financial controller can offer significant value.

What is a Financial Controller?

A Financial Controller is a key figure in a company’s financial operations, responsible for overseeing the accounting department, ensuring accurate financial reporting, managing internal controls, and maintaining compliance with financial regulations. They are often considered the backbone of a company’s financial management, ensuring that all financial transactions are recorded correctly and that the company’s financial statements are accurate and reliable.

Key Roles of a Financial Controller:

Accounting Department Oversight: A controller supervises the accounting team, ensuring that all financial data is recorded and processed accurately. This can include any outsourced bookkeeping or finance team.
Financial Reporting and Analysis: They prepare financial statements and provide analysis to support strategic decision-making. This reporting should include government filings, such as GST, payroll, and others as needed.
Internal Controls and Compliance: Controllers implement internal controls to safeguard assets and ensure compliance with regulations.
Budgeting and Forecasting: They develop budgets and forecasts to guide the company’s financial planning. This is normally on a monthly to 3 year timeline.
Audits: Preparation for and dealing with the external audit is another role that the business owners should burden their controller with.

What is a CFO?

A Chief Financial Officer (CFO) is the senior executive responsible for the overall financial strategy of a company. While a controller focuses on the day-to-day financial operations, the CFO is involved in higher-level strategic planning, fundraising, investor relations, and financial risk management. The CFO works closely with the CEO and board of directors to align financial strategies with the company’s long-term goals.

Key Roles of a CFO:

Cash Flow Management: Controllers can also manage cash flow to ensure the company can meet its financial obligations, but in most small companies this will fall to the CFO within their financial modeling.
Strategic Financial Leadership: CFOs drive the financial strategy and ensure alignment with business objectives. This will often include detailed financial models, which are fancy budgets and forecasts.
Capital Structure Management: They oversee the company’s capital structure, including debt, equity, and financing decisions.
Risk Management: CFOs assess and mitigate financial risks, working with the controller to implement the procedures that will mitigate these risks.
Investor Relations: They manage relationships with investors, analysts, and other stakeholders. CFOs often lead financial due diligence and integration efforts in mergers and acquisitions.

How Do These Roles Benefit a Business?

Both the Financial Controller and the CFO play crucial roles in ensuring the financial health of a business. The controller provides accurate financial data and ensures compliance, while the CFO leverages this information to drive strategic decisions and long-term growth. Both roles are essential for scaling and growing the business over a long-term.

Both roles exist in every company, however many smaller companies have the owner/CEO/external accountant handling these various accounting functions.

Controller or CFO Responsibility?

The easiest way to determine if a task is the responsibility of to the Controller or CFO is to ask if the task is resulting from a process or event that has already happened or a future that may happen. The Controller and CFO are two sides to the same coin, this is often why the role is combined in smaller companies.

Fractional Financial Professionals: A Cost-Effective Solution

Hiring a full-time controller or CFO may not be viable for every business, especially smaller companies or startups. A fractional controller or CFO offers a flexible, cost-effective alternative, providing the same level of expertise on a part-time basis.

Fractional Services: Controller vs CFO

Fractional Controller: Focuses on the operational aspects of financial management, such as accounting, reporting, and compliance, on a part-time basis.
Fractional CFO: Provides high-level strategic financial guidance, risk management, and investor relations, also on a part-time basis.

Benefits of Fractional Controller Services:

Cost Savings: Access to top-tier financial expertise without the full-time salary.
Flexibility: Services can be scaled up or down based on business needs.
Expert Guidance: Fractional controllers bring specialized knowledge that can help streamline financial processes and enhance decision-making.

Most companies will not need a full-time financial team member until much later than expected. Hiring a fractional hybrid controller & CFO will result in having that expert to handle your accounting processes in-house.

It is best to find a person you can trust to run your accounting system, as such a CPA would be ideal. Finding a CPA that works fractionally can be difficult, however allowing remote or hybrid work for the right candidate is one of the best ways to ensure you keep top talent, while maintaining a lower cost.

When Should Businesses Consider Hiring a Fractional Controller?

Exhaustion: As the owner you could be doing everything a team of 5 does for your competitors. Bookkeeping, Budgets, Modeling, Learning accounting and financial systems, or creating policies and procedures. These by themselves is a lot of work outside most people’s expertise, now add on marketing, sales, product development, employee management, and so much more it is almost impossible to do everything well. Most need help as a business owner. These are the ideal clients for Frosty Squirrel CPA services, as we want you to concentrate on scaling operations.
Scaling Operations: As your business grows, a fractional controller can manage the increasing complexity of financial operations. Implementing controls to ensure quality of data and technologies that can scale from $1M to $50M in revenue.
Increased Financial Complexity: If your business is experiencing more intricate financial transactions or compliance requirements, a fractional controller can help navigate these challenges. Expanding sales to another jurisdiction will always be complex, but it is always needed as the company grows.
Limited Budget: For companies that cannot afford a full-time financial professional, a fractional controller offers a cost-effective solution. Paying nearly $300,000 for 2 full-time employees is a steep cost cliff, it is much better to have 1 fractional for 1/3 of that.
Expert Financial Guidance: Businesses seeking expert advice without long-term commitments can benefit from the specialized services of a fractional controller. Having a friend who is an expert in a certain field is great, but some of us need to pay for that advice, and you should get more than the free friendly advice.

How Can a Fractional Controller Benefit Various Industries?

Professional Services Firms: Improve financial management and reporting accuracy. Your hours is your revenue, don’t spend it on struggling to figure out things that are not in your wheelhouse.
Manufacturing and Distribution: Optimize financial processes to support growth. Things can go bad if people don’t get paid on time, reliability of vendors is a lot to do with the terms you set out. Those terms should include some of your controls.
E-commerce and Retail: Gain valuable financial insights for better decision-making. Integrating systems that will work for your business to make reporting and accounting a few clicks of a button would be ideal.
Nonprofit Organizations: Ensure financial oversight and compliance. Strong controls in place help ensure that those in charge will be responsible while reducing the chances of fraud.
Technology and Startups: Manage financial complexities with expert guidance. Having a 5 year plan is a minimum requirement to even speak to most investors, having it done professionally while having your accounting audit ready is one of the best ways to show them you are serious.

Squirrel Thoughts

Whether you’re scaling your operations, facing increased financial complexity, or simply seeking expert financial guidance, a fractional financial controller will be a valuable asset to your business, providing high-level expertise without the full-time cost. The controller and CFO roles still need to be fulfilled; the only question is how much your time and sanity are worth.

While you could do all this and save $300k on two full-time employees, it might be worth it—but for $100k or less, your time is likely better spent elsewhere.

Squirrel Assistance

Frosty Squirrel offers an accounting automation service line that includes assistance with preparing for the roles of Fractional Financial Controller and CFO. This leads into our managerial advisory service line. Each company will be different for work and therefore cost requiring professional judgement in determining a quote.