You thought I was going to say bar, didn’t you? I thought about it, but decided it was going to take us down the wrong path. The purpose of this article is to help business owners like you understand how the role of bookkeepers, controllers, CFOs, and CPAs provide a critical function to your company. But in order to take full advantage of what they offer, you need to understand how they are a cohesive financial team that gets you the answers you need. Understanding the role that each of them plays is instrumental to creating the most efficient information gathering and decision-making team for you and your company.
You need a complete picture of how these roles fit together to allow you to drive the financial decisions in your company. Some of these roles involve down to earth, hands-on activities, and some end up being significantly more strategic. And it is less an issue of how big or small your company is. It’s about how you are gathering the information that you need to make the right decisions.
Understanding each role’s focus, and how they interface with the daily, monthly and annual activities in your company, is key. Only then can you take full advantage of what they have to offer. What is important are the types of activities they are involved in, the short and long-term impact that their decisions have, and whether the decisions or activities that they perform are more strategic or tactical.
The bookkeeper takes care of the daily transactions that occur in any business.
Their role is fully tactical. Those activities include generating and issuing customer invoices, receiving payments from customers and depositing them to the bank and properly applying them to the correct invoice. They 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 GL account. They will apply 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, they will enter them into the system to assure correct reporting of company activities. They will take direction from the Accounting Manager or Controller.
The controller provides direction to the bookkeeper and accounting clerks.
The role is mostly tactical, but may have some strategic elements to it. This is the person that initiates transactions and supervises the accounting team. The controller establishes the calendar for the activities that occur in the accounting department. They will set the schedule for how often they invoice or pay bills or run payroll. The controller writes the accounting procedure manual that established the procedures of how anything relating to cash is managed. Their role is to review the invoices, both AR and AP, to assure they are correct, with proper approvals. They review the bank and credit card monthly reconciliations to assure accuracy. They review general ledger postings for the month, identifying any anomalies that might have crept in, and writes up adjusting journal entries for the bookkeeper to enter.
When accounts payable checks need to be issued, it is the controller that will make sure that each entry has the proper approvals, and is ready to be paid. And, the controller will likely run payroll, or provide verification of timesheets and salaries before payroll is entered. At month-end, the controller may review the financial statements, taking a first look to weed out the significant transaction errors, and looking into numbers that exceptions. The controller may propose changes in how things are processed.
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. And, with the additional education and experience, the CFO brings a strategic financial view to the company.
This involves looking into and planning for the future. Things like understanding product costs, manpower costs and efficiency, management of inventory, analysis of use of inventory and cash, cash flow planning, analysis of planning for future equipment or facility purchases. These are all evaluations into how the company runs “under the covers.” This is how additional money is squeezed out of operations and added to profitability. The CFO will also develop ideas about exit strategies for the owner, acquisitions, expansion, or mergers. These are all things that help develop the future of the company.
It’s important to not just understand where the company is now, but having enough of the right information so that decisions can be made on where the company should be going and how it can get there.
The Certified Public Accountant is the person who makes sure that the company and the business owner comply with state and federal regulations relating to the paying of taxes.
If the bank or outside investors require it, the CPA can also provide a Review or Audit of the company’s financials. Both tax filings and audits require specialized education that none of the other three individuals would have. And, 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 the 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.
There are many people that work in a business, in different functional areas. Often the financial areas are pushed off to the side because business owners would rather concentrate on what they know, product, delivery and customer service. Nobody is going to overstate the importance of those, but what happens behind the scenes, to make sure that employees and vendors get paid, that financial statements are properly produced, that future financial plans are prepared and that taxes are calculated and paid promptly is just as important.
These activities are done by full time employees in large companies, but that doesn’t mean that these roles don’t have a place in small companies as well. The use of fractional employees, outsourced services, provides these same services to small to middle market sized companies on a part time basis, assuring that business owners have all the tools at their fingertips to run their companies efficiently. Make changes today that affect profitability tomorrow.
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