Deciding on the right financial professional for your growing company depends on various factors, including the size of your business, the complexity of your financial needs, and your future growth plans. Bookkeeper vs. Controller vs. Fractional CFO vs. Full-time CFO vs. Tax Accountant - which kind do you need?
Let's break down the roles and when they might be most appropriate:
🔹 Bookkeeper: Bookkeepers manage day-to-day financial records such as tracking transactions, invoicing, and basic financial reporting. They are ideal for small businesses with straightforward financial needs. A bookkeeper can handle basic accounting tasks but may not have the expertise for strategic financial planning.
🔹 Controller: A controller oversees the accounting operations of a company, including the production of financial reports, maintenance of accounting records, and a set of controls designed to mitigate risk. This role is more advanced than a bookkeeper and is suitable for businesses with growing accounting needs.
🔹 Fractional CFO: A fractional CFO (Chief Financial Officer) provides executive-level leadership and financial strategy services on a part-time contract basis. The services are focused on financial planning, risk management, financial forecasting, and financial reporting and decision-making. The fractional CFO routinely analyzes the company’s financial strengths and weaknesses, and proposes corrective actions. A fractional CFO is often involved in the company’s business development and corporate strategy, and can provide oversight of accounting department systems, processes, and staff (e.g., a bookkeeper or controller). This is a good option for small to medium-sized businesses that need strategic financial guidance but do not have the resources or need for a full-time CFO.
🔹 Full-time CFO: A full-time CFO provides executive-level leadership and financial strategy services on a full-time basis, as a company employee. The services are focused on in-depth financial planning, risk management, financial forecasting, and financial reporting and decision-making. The CFO is routinely involved in the company’s business development and corporate strategy. The position is responsible for overseeing all financial aspects of the business, including day-to-day operations. This role is essential for large businesses or those with complex financial structures where full-time involvement is necessary.
🔹 Tax Accountant: A tax accountant specializes in preparing and filing taxes and can offer advice on tax planning and compliance. While they are crucial for ensuring your business meets its tax obligations, they typically do not handle the broader scope of financial management and strategic planning a controller, fractional CFO, or full-time CFO would offer.
Here are some guidelines based on the size of your business (in terms of annual revenue):
🔹 $0-50,000 - Do your books yourself and get a tax accountant to file your income taxes.
🔹 $50,001-500,000 - Invest in a quality bookkeeper. It will be some of the best money you've ever spent. Continue to use a tax accountant to file your income taxes.
🔹 $500,001 - 1,000,000 - You'll need an experienced bookkeeper or controller, as strategic financial planning begins to become as important (if not more so) than basic record keeping and staying compliant with government regulations. You may even want to consider a fractional CFO at this stage. Keep your tax accountant for tax planning and filing your income taxes.
🔹 $1,000,001 - $40,000,000 - Your business is growing. What got you here isn't going to be what it takes to get the the next level. Now is the time to add a fractional CFO. The fractional CFO can help oversee your current accounting staff, and collaborate with you and your tax accountant regarding tax planning and income tax filing.
🔹 $40,000,001 - $50,000,000+ - at this stage you may need to transition from a fractional CFO to a full-time CFO.
In summary, if your business is small and your financial transactions are straightforward, a bookkeeper and/or controller might suffice. Use a tax accountant for filing your income taxes. As your business grows, consider adding a fractional CFO, and later a full-time CFO.