Finance Director vs Financial Controller

Most companies have an individual in a senior Finance role. Often the title given is one of Director, other times it is Controller, many times it’s confusing to understand the difference.

At its simplest, the Finance Director “directs” and the Controller “controls”.

Many growing organisations do not have a clear understanding of the two positions, often overlooking the value that a Finance Director can bring to their business. All organisations can see significant value added by a Finance Director – often it’s just a question of determining what level of Finance direction is needed, and for the typical SME a part –time FD is often an ideal solution.

Whether full time or part time it can be very valuable to have a team member with 30 years’ experience in business, the beauty of part time is that a company doesn’t have to pay for the experience 100% of the time.

We can do a Strategic Business Review of your business from as little as £3,000.

To determine the level of financial leadership a company requires, and the right mix of Financial Controller / Part Time FD, it’s important to look at the differences between the two roles.

Understanding the Duties of the Finance Director and Controller

The Financial Controller is often thought of as the head of the accounting department, although this role shouldn’t be confused with that of a bookkeeper. The primary function of the Controller is to maintain and operate the books and records of the business, looking back at data already generated.

Under the guidance of the Finance Director a Controller also maintains standard operating procedures for all accounting and bookkeeping functions. The FD is the financial leader of the business.

While the primary function is to look ahead, the Finance Director must also be able to understand past financial performance in order to accurately predict the organization’s financial future.

The chart below summarises the key differences between the two roles – obviously the level of importance and experience / time required varies between the size and complexity of Companies:

Finance DirectorController
Strategic Planning
Corporate Strategic Planning
a) Participation in strategy discussionsYes
b) Selection of initativesYes
c) Creation of financial plan (p/l, b/s, cash)YesYes
Tax strategyYes
Risk management strategyYesYes
Treasury StrategyYes
Internal Control StrategyYesYes
Market / Product / Competitive AnalysisYes
Functional oversight / management
Accounts Payable/Receivable/BillingsYes
Financial AnalysisYes
TaxYes
TreasuryYes
Non-finance staff areas (HR, IT, etc.)Yes
Accounting
Manage Accounts Receivable - billing/collectionYes
Manage Accounts Payable - payment/discountsYes
Cost Accounting (job cost, per unit, etc.)Yes
Reconcile Bank accounts/loansYes
Issue basic financial statementsYes
Design and maintain Chart of AccountsYes
Month end close processYes
Compliance with GAAPYesYes
Management Reporting:
Design Management reportsYes
Prepare Management reportsYes
Develop Action Plans from Mgt ReportsYesYes
Design Financial Statements: historical & projectionsYes
Prepare Financial Statements: historical & projectionsYes
Financial Analysis:
Develop Performance MeasurementsYes
Maintain Performance MeasurementsYesYes
Operational Reporting packageYesYes
Develop Action PlansYesYes
Budgeting/Forecasting
Develop Budget targets and other financial plansYes
Facilitate budget process: accountability, scheduleYesYes
Prepare budgets & forecastsYes
Project cash flowsYesYes
Review Capital requests/approval processYes
Process Capital requestsYes
Internal Controls / Audit
Design and review Policies and ProceduresYesYes
Maintain Policies and ProceduresYes
Review Internal Control systemYesYes
Maintain Internal Control systemYes
Manage Auditor relationshipYesYes
Prepare Audit information/schedulesYes
Develop Action Plans relative to internal control needsYesYes
Board of Directors / Investors
Board reporting - preparation/deliveryYes
Maintain investor relationsYes
Contracts / Outsourced functions
Negotiate contractsYes
Negotiate Outsourced functionsYes
Maintain Outsourced functionsYes
Maintain insurance coverageYes
M&A / Divesture activities
Develop M&A targetsYes
Negotiate acquisitionsYes
Due DiligenceYesYes
ImplementationYesYes
Divestitures/ShutdownYesYes
Investment / Funding Activities:
Develop banking relationshipsYes
Maintain banking relationshipsYes
Arrange debt financingYes
Conduct equity placementsYes
Invest fundsYes
Monitor cash balancesYes

There is a significant difference between the strategic and tactical value that FDs brings to the executive leadership teams of their respective organisations, and that of Controllers.

For example, the Controller’s role is to provide financial statements and gross profit statements showing a 5% decline in the company’s quarterly revenue. The FD’s role is to evaluate and explain the causes behind the decline; they look beyond the numbers to see root cause, as well as the corrective actions needed.

The Value of a True Finance Director

The FD holds a variety of responsibilities, including cash management, budgeting, compliance, internal controls, corporate credit and collection, audit, financial planning and strategic planning. The Finance Director acts as a trusted advisor to the executive leadership team, working as a sounding board when key decisions are being discussed.

The most significant value provided by a FD often centres around the area of financial oversight and management. Analysis of the reports provided by the Controller enable the Finance Director to generate working capital and forecast information. Analysing and reviewing monthly P&L statements, balance sheets and cash flows provides the information needed to drive toward data-based decisions.

Ultimately, the FD works to correlate operational and financial data provided by the finance department so that the executive team understands the financial impact of decisions in real-time.

Growing businesses cannot often afford, or may simply not require, the services of a full-time FD. Yet, they may be seeking the forward thinking skill sets that such professionals bring to the table. A part-time FD can often provide the needed financial expertise and direction at a fraction of the cost, creating affordable options for small and growing businesses.

A part time FD who functions on an as-needed basis can become a trusted advisor to the MD, offering key business, financial and operational insights needed to control and shape the direction of the organisation.

Company Size

Although there are no hard and fast rules (and turnover for service based companies will have a lower threshold than these typical non service company thresholds), as a general guide:

Pre-Revenue

Assuming the firm is in fund-raising mode with limited staff, it may want to consider a part time Finance Director with fund-raising capabilities and outsource the basic accounting (ie. Controller) functions until they can build a management team. Typically the fund-raising will be more efficent and successful if an experienced Part-time FD has been used to prepare the Business model and Competitive analysis.

Under £10M in Sales

Full-time Book keeper / Controller + Part Time FD for significant events (acquisition, major contracts, etc.) and monthly overview / guidance. Consider a fund-raising Part Time FD if capital is needed.

£10M – £40M

Typically the same as under £10M, but will have controller and maybe finance staff unless the firm is in rapid expansion, secured substantial investment or in rapidly changing environment (new pricing models, etc.). If firm is going public, generally a full time FD is added to oversee process.

Over £40M

Assuming firm is looking to grow, then a full time FD is likely to be appropriate – even then much will depend on the underlying complexity of the operations (overseas trading, multiple customers, manufacturing operations). The skill level need will vary with the company’s needs (e.g. acquisitions, new systems, managing non-finance areas, etc.)

Not withstanding a full time FD, in many cases it is very worthwhile to also use an experienced part time FD for significant projects, or independent view point to the Board.

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About the author

This was written by Neil Dockar, a Commercial FD with over 35 years experience in business. Following 12 years with Procter & Gamble in a variety of senior, Europe wide, Finance roles he was Group Finance Director at Capespan International plc for 12 years, where he initiated a wide range of new business ventures in addition to leading the M&A activity. Since 2006 he has been involved in a number of start-up ventures, as well as providing bespoke consultancy to a wide range of clients including Franchising retail shake bars, Internet start-ups, Property Services (Estate Agents and Valuers), Care Homes, Digital Marketeers, Financial Services.

Neil is a founder director of FD4, which is a network of experienced commercial Finance Directors that are passionate about adding value to Companies. They are engaged Part Time (on an hourly or daily basis) to do the work of a full time Finance Director, but at a fraction of the cost. They specialise in Exit Planning; Cash Generation and Performance Improvement, see more at www.fd4.co.uk