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Typically, a small company should begin with a Controller. A Controller will oversee your bookkeeper and/or accountant to ensure accurate financial reporting and will install internal controls and processes needed for a small company for controlled growth and to seek outside investment or raise capital. A Controller will also provide analysis on the financial statements and other financial reporting, so the decision makers have the necessary tools to make well informed decisions for the future of the company.

Typically, a company should have a CFO when:

  1. The company wants to raise capital through outside investment. This would involve the creation of a detailed and professional business plan with three year financial projections.
  2. The company is at the stage of growth where a long term strategic financial plan is necessary. While a small growing business will focus on the current and upcoming year, a Controller is ideal to assist with the strategic, short term financial planning. A CFO is necessary when the company needs strategic financial planning for five, ten, or even twenty years.
  3. The company is planning to purchase other companies. A CFO will be needed to evaluate the business and determine whether or not the asking price is in line with the financials and structure of the company being purchased.
  4. The owners are planning on selling the company. The CFO will help get the financial statements and controls in place to maximize the asking price. This is typically a multiyear process for small businesses and can take up to three years or more.
  5. The company needs succession planning. If an owner(s) does not want to sell their company, they will need to plan for the next generation of owners to ensure the business survives after control is passed. A succession plan is necessary to ensure the replacement of key employees does not interrupt the operations or continuity of the company.

This will vary but at $3mm annual revenue, a company may want to hire a fractional Controller. If the company is trying to grow quickly, a fractional or full time Controller should be hired sooner to install internal controls and processes to ensure growth is controlled and manageable. It will cost your company money and lost opportunities to bring in a Controller later than needed.

  1. To provide accurate, up-to-date financial information to decision makers to enable them to make well-informed decisions.  It will be the Controller’s duty to highlight areas of financial concern to the ownership.
  2. To mitigate risk through the establishment of internal controls and processes.
  1. A Controller will ensure financial reporting is accurate and will provide analysis on the reporting, so the decision makers know exactly what the statements are telling them and where in the statements to find the information needed to make their decisions.
  2. A Controller will set up internal controls and processes to help protect the money and relationships the company has earned through accurate pricing, reducing waste, and minimizing liability and risk. As an ongoing function, a Controller will manage the internal controls and processes to ensure they are functioning properly without affecting operations more than necessary and to revise the controls and processes accordingly.
  3. A Controller will help manage cash flow through cash flow projections and analysis and manage the accounts receivable and accounts payable terms and processes. This will ensure the company has access to its funds for the maximum amount of time while maintaining good relationships with clients and vendors.
  1. Through accurate financial reporting and analysis, a Controller can provide decision makers with information necessary to determine when additional resources are needed.
  2. Through cashflow management, a Controller can provide decision makers with information necessary to determine when the company can afford to acquire additional resources.
  3. Through internal controls and processes, a Controller can ensure the company’s growth is manageable and sustainable and the company can meet all its contractual obligations while maintaining a steady growth rate. Uncontrolled growth can lead to litigation, loss due to waste and theft, inefficiencies and higher costs, and reputational damage.

No. When hiring a Controller or fractional Controller/CFO firm, the Controller will oversee your current bookkeeping/accounting staff, not replace them. A good Controller will also learn your current processes and improve upon them, not completely redo them. This will ensure the transition is relatively painless for both you and your employees.

  1. A bookkeeper/staff accountant typically is not equipped to make the necessary monthly adjustments to the financial statements for accurate reporting. 
  2. A Controller will establish internal controls and processes to ensure revenue is recognized appropriately and all expenses are accurately recorded.
  1. Opportunity cost is the loss of potential profit from other more profitable projects by accepting a less profitable project. More work is not necessarily a good thing when your company is expending resources on a project with smaller margins and profits and missing out on other projects with better margins because your company does not have the resources to perform them.
  2. A Controller will evaluate a project to ensure the project will have the company’s target margins. The overhead percentage will also be evaluated before a project to ensure the project is able to cover its share of the company’s administrative costs without reducing the project’s projected profits.
  1. Small businesses that do not have periodic project financial reporting to outside parties may think they do not need a Project Controller. However, a Project Controller can help the Project Manager with cost/budget tracking, overseeing document control, change order management, and ensuring proper administrative processes are being followed. This can free up time for the Project Manager to handle the on-site operations of the project or multiple projects.
  2. A Project Controller will also ensure all necessary information and documentation is included with pay applications to ensure prompt payment according to the contract documents. This mainly pertains to Cost-Plus and T&M contracts.
  3. A Project Controller will ensure all documentation is relevant and readily available in case the owner chooses to audit the project’s books at any time during the project.

Yes, a Project Controller’s time should be billed to the project but may not be billed to the client if working on a cost-plus project. Typically, a Project Controller’s time is included in overhead, but if the Controller is performing functions normally associated with a Project Manager, then the Controller can bill his/her time as an administrative Project Manager.

  1. A Project Controller can evaluate a project before a contract is executed to ensure:
    1. The company’s target margins are projected to be met.
    2. The overhead percentage is sufficient to cover its share of the company’s administrative costs relative to the size of the project.
    3. Proper controls and processes are in place to mitigate risk/inefficiencies associated with the administration of the project.

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