From Controller to CFO - Understanding the Difference
Lynn L. Ruby
Sandra Jones is a controller at a $15 million Arizona manufacturer reporting directly to the CEO/Owner.Some of her responsibilities include supervising an accounting department of three employees, producing monthly budget and cash flow forecasts, and timely closing of the monthly books. Six miles away, Jason Smith is a CFO for a $9 million custom home builder. On a daily basis he supervises an external bookkeeper, reconciles the monthly bank statements, prepares bills for payment, and deals with insurance and HR issues among other duties.
Which of these individuals has an appropriate title?Is Jason really operating as a CFO?Is Sandra truly a controller?
CFO?Or Overblown Controller?
So what is the difference between a controller and CFO?If you hold one of these titles, are you truly operating in that role?And if you’re the CEO, do you have, or should you have, a controller or a CFO?
At a recent Arizona Society of CPAs lunch meeting, a panel of three Arizona CFOs – Jim Buhr of Bashas’ Inc, Tom Sabol of Suntron Corporation and Larry Seay of Meritage Homes Corporation — discussed their roles, including what education and skills are required to deserve the title, the importance of communication skills and strategic risk taking.
Rear View Mirror or Windshield?
General consensus among these highly experienced CFOs confirmed that a controller focuses their efforts mainly on historical data and analysis.Their time is spent looking backward at what has already transpired from a financial standpoint. Conversely, a CFO has a forward looking focus – constantly searching for and analyzing ways to help the company grow.
Tom Sabol, CFO at Suntron Corporation estimates that 80 percent of his time is spent in forward thinking analysis with the remaining 20 percent on historical data.In a similar vein, CFO Larry Seay of Meritage Homes Corporation spends the majority of his time in a future focused mode.
Another key difference between the two roles, according to Jim Buhr, CFO of Bashas’ Inc., a privately held grocery company, is that a CFO needs to be out of his or her office more often than not.“If a CFO is in their office too much, they’re not doing their job,” Buhr believes.Buhr spends a great deal of his time touring the Bashas’ stores to better understand the customer, the employees and the management processes. He operates as a consultant to the president, responsible for setting best practices, making recommendations for efficiency improvements and boosting the company’s competitiveness and profitability.
Seay at Meritage makes another key distinction — “The CFO is the conscience of the company. They must be the ethical compass for the organization. First question about any new endeavor is ‘is it legal and ethical?’Second question is, ‘is it the right thing to do and do we want to be associated with it?’”Any new initiative must pass those two hurdles first before being considered for implementation.
The Keys to the CFO Office
If you’ve got the desire to be a true CFO – or need to hire one – what are the basic skills and education required to be given the keys to the CFO office?
Obviously, an undergraduate education in finance or accounting is essential. And having both would give you the tremendous advantage of being able to see both points of view as it does for Seay.But how necessary is it that a CFO be a CPA?
Tom Sabol believes it’s almost a requirement now for a CFO to have their CPA designation. “Especially when working for a public company, you’d be at an extreme disadvantage without your CPA,” he says.It used to be that the CPA designation was primarily for working in public accounting. Not anymore.
Even on the private company side, Buhr feels that with the emphasis now on internal controls and SOX, the knowledge required of a CFO has grown to the point where having a CPA gives you a tremendous advantage.
Beyond the technical skills, the panelists agreed that you’ll never be a successful CFO if you don’t have some key analytical and communication skills. CFOs are swimming in a sea of data. It’s easy to get access to data.But most valuable is the ability to take that glut of data and interpret it into meaningful information for the CEO and management team.According to Buhr, management wants to see the bottom-line numbers, understand their impact and be armed with the knowledge necessary to make informed decisions.A CFO must be able to bring that to the table.
Seay agrees.“Being able to synthesize large amounts of data down to something people can understand in a short amount of time is critical,” says Seay.
Sabol emphasizes that this data analysis extends beyond pure financials.“As a CFO, you must understand and be able to communicate information about the operational data. To have a positive impact on the company’s growth, you must understand the whole business and its metrics, not just the financials.”
And being a CFO takes guts. At times you’ll have to stand up to the CEO and the management team with a differing professional opinion.You’ll need to be able to clearly state your case, the ethical and business reasons why your opinion is sound, and still remain friends afterwards.This skill usually comes with a lot of experience, a lot of background consensus building and political savvy.But the bottom-line is that at the end of the day, you’ve got to be able to look in the mirror and feel good about yourself.
Ready to Make the Leap?
So, are you ready to make the leap into a true CFO position?And how do you make it happen?
None of our three CFOs were handed their positions on a silver platter and none had a mentor to steer them through the ranks.They certainly earned their titles.How?Through years of hard work, personal sacrifices, and knowing the right people.And key to all three’s success was putting themselves in the right place, so that when the right time came along, they were ready.
Jim Buhr waited 17 years for the CFO position to become available.And during those 17 years, he was in a company of his choosing, working with people he trusted and respected, and taking risks based on smart judgment.
Larry Seay was willing to change companies when the right opportunity came along.He developed a network and worked hard at maintaining that network to find the next great opportunity.
Tom Sabol also joined a team he felt he could trust.“Because the CFO and CEO are joined at the hip, you’ve got to trust and respect that person. Being the CEO’s right hand, you sometimes have to sacrifice personal time.When urgent issues come up, you have to be available.No question.”
No Easy Answers
So let’s re-consider Sandra and Jason.Which one is the true CFO?Not an easy question to answer is it?In fact, you’d have to have more data, spend some time observing and evaluating their interactions with management and staff, rank their ethical behavior and consider how closely they work with the CEO.
What we can conclude is that a true CFO holds a critical management position, brings incredible value to a company, and is a title not easily earned.And if you’re still ready to go for it, put yourself with a team you trust, take smart risks and be ready when your opportunity comes along.
Lynn Ruby is the director of business development and marketing for Henry & Horne.She is responsible for the strategic marketing of the firm including branding, advertising, public relations, electronic marketing and client development. She can be reached at (480) 839-4900 or LynnR@hhcpa.com.
AZ CPA – July/August 2006
