Your Ultimate Finance Department Checklist

Author: Larry Chester, President

Your Ultimate Finance Department Checklist (By Business Size)

It’s easy to grow without noticing that your finance and accounting department is stretched far too thin. From overworked staff accountants to controllers running month-end closes, a poorly structured finance, and accounting department can put strains on your business’ growth.

Here’s a guide to set your accounting and finance department up for success as your business grows.

Roles and Responsibilities

As you audit your accounting and finance departments, you may find there are some key roles missing from your business that could be negatively impacting your company’s bottom line.

Larger companies will require additional positions that work closely with the finance department, such as an HR Manager or attorney. Smaller companies, on the other hand, might have individuals in positions that encompass areas outside their traditional parameters.

The purpose of this checklist is to create structure around when to grow, what roles are essential at what business sizes, and how to benchmark your accounting department against industry standards.

Company Size

I [Larry Chester] once met a business owner who told me he had a small manufacturing plant outside Cincinnati. He talked about some of his challenges and invited me out to have a walkthrough.

When I arrived, it was about an acre of warehouses with over 400+ employees. His version of “small” was in comparison to his friend’s company which was, well, Cintas. All this to say, small is not always small, so let’s put some official parameters around these company sizes.

What is a Small Business?

A small business is traditionally classified as ranging from 5 to 25 employees. In this size company, your finance team should include a bookkeeper, with an outsourced CPA, and payroll.

Having a highly engaged CPA as opposed to one who just files taxes for you can fill the gap until you hire a higher-level member of your accounting and finance team. You may also find that your bookkeeper offers some fractional higher-level services as you approach the larger size of this small business category.

Whereas small companies aren’t in a position to afford to pay for a full-time CFO, a fractional CFO can provide the operational finance viewpoint that a CPA or other accounting staff might miss.

Keep in mind that small businesses are exposed to a great deal of risk for the very reason of being smaller and having less oversight. Everything from poor password protection to lax expense reporting can create opportunities for theft. 

What is a Mid-Sized Business?

A mid-sized business ranges from having 24 to 50 employees, with revenue between $10 million – $1 billion. A mid-sized business should have a Controller, Staff Accountant, Bookkeeper, and CPA.

One danger that many businesses in this stage are exposed to is overburdening the controller with tasks that are better accomplished by a staff accountant. Another danger, similar to the small business, is a lack of strategic oversight.

Mid-sized businesses benefit the most from hiring a fractional CFO. Why? At this level, there is enough complexity that CFO services can positively impact business decisions. We know, however, that hiring a full-time CFO can come with a hefty price tag. A part-time outsourced CFO provides the strategy of a C-Suite member without the price tag. 

What is a Large Company?

A large company’s size is 100+ employees. A large company’s finance and accounting department should include a CFO, Controller, multiple Staff Accountants, an in-house CPA, and a Bookkeeper.

At the large corporation or ALE level, most companies have a hierarchy that demands a full-time CFO, as well as the CEO, COO, CMO, and multiple VPs of departments.

Large companies without a CFO may have grown organically with one of the founders taking on the role and learning as they went. In these scenarios, bringing in a fractional CFO can benefit everyone. The additional set of external eyes can open up opportunities for profitability, while the experience of a classically trained CFO can provide insights that a self-taught CFO or President/Founder performing this role may not know to look for.

Bringing in that outsourced role in the face of growth, acquisition or merger can bring stability, insight and can even increase profitability while allowing your existing team to remain in place.

Accounting and Finance Department Review and Checklist

CFO

Here’s where the role shifts dramatically from tactical to strategic. Yes, a Chief Financial Officer can do everything that a bookkeeper and controller can do, which allows the CFO to provide mentoring, personal development, and supervision. Plus, with the additional education and experience, a CFO brings a strategic financial view to the company.

This involves planning for the future. Understanding product costs, manpower costs, and efficiency, management of inventory, analysis of the use of inventory and cash, cash flow planning, analysis of planning for future equipment or facility purchases are all in-scope for a CFO.  These are all evaluations into how the company runs “under the covers.”

The CFO will develop ideas about exit strategies for the owner, acquisitions, expansion, or mergers. These are all things that help benefit the future of the company.

It’s important to have enough information so decisions can be made on where the company is going and how to get there.

Controller

The role of a controller is mostly tactical but can have some strategic elements to it.  This person initiates transactions and supervises the accounting team. The controller establishes the calendar for any activities that occur in the accounting department.  

The controller will set the schedule for how often they invoice, pay bills, or run payroll.  They write the accounting procedure manual that establishes the procedures of how anything relating to cash is managed.

Moreover, it is the controller’s role to review the invoices—both AR and AP—to assure they are correct with proper approvals. They review bank and credit card monthly reconciliations to assure accuracy and they review general ledger postings for the month—identifying any anomalies that might have crept in and writing up adjusting journal entries for bookkeepers to enter.

When accounts payable checks need to be issued, the controller will make sure each entry has the proper approvals and is ready to be paid. The controller will likely run payroll or provide verification of timesheets and salaries before payroll is entered.

At month-end, the controller may review financial statements, taking a first look to weed out significant transaction errors and looking into numbers of exceptions.  The controller may propose changes in how things are processed.

Staff Accountant 

The role of a staff accountant is largely tactical and involves oversight of the bookkeepers and direction-taking from Controllers or Accounting Managers in the case of Staff Accountants.  

Accountants prepare financial statements, can execute internal audits, and prepare reports for taxes. It’s important to note that accountants do not communicate with the IRS on your behalf. For that, you’ll need your CPA or tax attorney.

Bookkeeper

The role of a bookkeeper is fully tactical.  

The bookkeeper takes care of the daily transactions that occur in any business. A bookkeeper, hence their name, keeps the financial books. They may use software to help keep accurate records of transactions.

Bookkeepers track accounts payable, accounts receivable, and inventory. Your bookkeeper may actually write the checks or set up the ACHs to pay taxes but bookkeepers do not give tax advice or communicate with the IRS.

Tasks include generating and issuing customer invoices, receiving payments from customers, depositing payments to the bank, and properly applying them to the correct invoice. Bookkeepers will receive invoices from suppliers and after getting proper approval, will enter those invoices—properly coding them to make sure that the charges are correctly applied to the correct general ledger account.

Bookkeepers will apply for payments, issue checks, and reconcile the bank and credit card statements at month-end. They may review the general ledger or take direction from an accounting manager or controller to make adjustments to the entries that are made.

When given a list of journal entries, bookkeepers will enter them into the system to assure correct reporting of company activities.

CPA 

A Certified Public Accountant (CPA) is also an accountant. They, however, have passed exams and licensing requirements to be certified by that state.

CPAs prepare tax returns for businesses and individuals, sign tax returns, and can represent taxpayers before the IRS for audits and other matters. Your CPA is the person who makes sure that the company and the business owner comply with state and federal regulations relating to paying taxes.

If the bank or outside investors require it, your CPA can provide a Review or Audit of your company’s financials. Both tax filings and audits require specialized education that none of the other three individuals mentioned would have.

With the regular changes to the federal and state tax code, there’s ongoing education that the CPA needs to keep up with to make sure that they do filings and reports correctly.

There are unique ways that a CPA can help a business owner. The government has many different programs that provide tax credits to businesses. Research and development costs may be tax-deductible, depreciation needs to be properly calculated, cost segregation studies may reduce the taxes owed on buildings owned by the company or business owner, employee training may be tax-deductible, and empowerment zones may provide additional tax benefits to the business owner.

Payroll

As your company grows, Quickbooks may not provide all the needed functions for payroll. There are many payroll providers available, but the key is finding one that works for your specific business. Any payroll provider manages payments towards employees, time off balances, and making sure paychecks are rolled out in a timely manner.

Curious about the difference between outsourcing finance and accounting? Read our blog to learn more about what hire will work best for your business.