The CFO Is Not Your Most Important Finance Hire

THE CFO’S SECRET WEAPON

I build finance functions for a living and solve problems related to their execution. That’s not all involved in being an outsourced CFO, but that is the essential part. It’s the bottom of the triangle of Maslow’s Hierarchy of Needs for a CFO.

Over a few times in my tenure as an outsourced corporate finance consultant, I have been brought in by a CEO or an existing CFO to “sort out” the corporate finance function.

Regardless of the circumstances, I find that these companies all have one thing in common: No Controller is on the team. There is no human with that title and no human filling this role.

WHAT’S A CONTROLLER?

A Controller is generally in charge of preparing accurate and timely financial statements according to USGAAP. Controllers are typically highly skilled accountants, and the best are intelligent, likable, business-minded problem solvers with a core competency in technical accounting.

Accountants memorize rules, apply them to business activities, and defend their decisions once a year during an audit; as a Controller, days and hours matter. The end of the month is the end of the month, even if that day is New Year’s Eve or your mom’s birthday.

It’s not a super sexy job, but it’s priceless to the CFO.

This is the most challenging position to fill when building a finance department. It takes time and diligence to find a Controller with the skill set and cultural fit needed to make this position successful. The worst Controller hires that I made, I made from a stack of resumes—the best I found through my network.

Why are controllers so valuable to CFOs? Without a super solid controller, the CFO becomes the Controller. In essence, the CFO becomes the finance department.

Think of it this way: Your VP of Engineering might code the back end of the entire product for some time, but once you are big enough as an organization, he won’t because a back-end developer is a different job than a VP of Engineering. Same thing in corporate finance.

WHY IS THIS SO IMPORTANT?

There are a ton of accountants available who will keep your books for you from the far reaches of the globe. I’ve worked with many CEOs who think accountants are a commodity and thus should give the work to the lowest paid one. This may be true for some very transactional roles in the accounting department, but it is not this one. But the risk to the CFO is enormous if this hire is not done right.

Financial accounting is the common language of financial markets, banks, and investors. The greater the revenue, the higher the expectation for accurate financial reporting.

If the Controller is not cranking out timely and accurate financial statements, as a CFO, I can’t just tell the bank or the investors they have to wait. Your VC firm or governing board doesn’t care that your Controller sucks and that your mother’s birthday is January 2nd. They’re not waiting for preliminary results for the last fiscal year.

Fiscal year-end waits for no one. If the CFO screws up the Controller hire or tries to piece the core financial accounting role based on the planet’s lowest cost per hour possible, no bat phone will fix this in time for the deadline. (Well, there is. I worked with a few when one of my former employers was de-listed. They were awesome! But these kickass Batmen of US GAAP are prohibitively expensive. And that CFO lost his job.) The CEO will not understand the value of what does not exist until someone external to the company calls them out on not having it. 

This is also the role of the CFO. To keep the CEO out of highly predictable and unfortunate situations. 

Early Stage CEOs,  you can live without a CFO. Really, you can. Maybe even for a long time. But you cannot live long without a Controller. Work with not the first one, or the cheapest one, but the best one.