Fractional CFO vs Bookkeeper vs Controller vs CPA: Who Does Your Business Actually Need?
If you’re a self-made business owner running a Main Street business, you’re used to minimizing your overhead everywhere possible. It’s easy to see the ROI of a sales representative or a marketing whiz; they’ll bring in new business. And a capable operations person will help execute it.
But What Does Finance Actually Do?
A lot, it turns out, and it’s usually the accounting and finance function where many scrappy business owners tend to be penny wise and pound foolish, leaving precious value on the table.
If you’re not working closely with your finance department, you’re likely missing the key piece that turns your financial statements from random snapshots to strategic forecasts, the shift that lets you start running your business by looking ahead instead of just looking back.
In this post I’m going to convince you that as a business owner you really need them all: a CPA, a bookkeeper, a controller, and a fractional CFO. They each do a different job for your business, and together, they not only save you money, they help make you more.
The real question isn't controller vs CFO, or bookkeeper vs a CPA. It's how all four work together.
Meet the Four Roles
Let’s walk through each role together starting with your CPA, since all business owners have one.
The CPA: Your Tax Optimizer
You likely realized the first time you opened a tax form that this wasn’t for you, so you quickly asked a friend, family member, or fellow business owner for a referral to a CPA who could help you do your taxes. Your CPA is your outside adviser who focuses on minimizing your taxes in compliance with law. They see the world through the lens of minimizing your taxable income. This role is extremely important and cannot be understated. The US tax code is a labyrinth that requires expertise that can take decades to acquire. As someone who fights their way to build something, you want to control how the fruits of your labor are spent, so paying what you owe in tax and not a dollar more is an admirable goal. A good CPA will help you optimize your business to accomplish this goal, and in so doing be an indispensable member of your business advisory team.
The Bookkeeper: Your Daily Scorekeeper
Next up, let’s talk about the role of a bookkeeper. You may not have someone with the title of bookkeeper in your organization, but you have one. Your bookkeeper is responsible for your transaction accounting. They likely work in QuickBooks or whatever accounting software you use for your business. They categorize expenses and book invoices. In most organizations, they are also responsible for things like payroll processing, credit cards, paying bills, collections, bank deposits, etc. There are many reasons to have a bookkeeper, but if nothing else, this role is needed in order to prepare schedules for your CPA to do your taxes. If that’s all your bookkeeping function does, it’s possible that your CPA serves this function for you, or that you (the owner) do this periodically yourself. In either case, you are completely underutilizing the potential of what a bookkeeper can provide your organization. A great bookkeeper sees all the flows in and out of your organization, giving them a front row seat to potential problems before you might see them. Because they are in your books daily, they can catch things before they become a problem, rather than trying to resolve issues created in the past. Most importantly, without a strong bookkeeper, the downstream functions that we will get to next simply are not possible. Accurate, timely bookkeeping is the foundational building block of a best-in-class accounting and finance function.
The Controller: Turning Cash-Basis Chaos Into GAAP Truth
Next, let’s move to the controller. This is where most small businesses fall off the apple cart. You do not need a controller to file your taxes, so if that’s all that concerns you as an owner from an accounting and finance perspective, this role wouldn’t occur to you. My definition of a controller is the individual responsible for assuring the preparation of timely and accurate accrual based financial statements (referred to GAAP or Generally Accepted Accounting Principles based financial statements). Put simply, what this means is that you generate monthly financial statements (income statement aka P&L or profit & loss statement, balance sheet, and cash flow statement) that are instructive in how your business is actually performing.
A bookkeeper will get all of the transactions properly coded, but the missing piece that is filled by the controller is transforming the bookkeeper's “cash basis” work to “accrual basis”. We’ve written about this [here], but to use one example: if you pay for a 12-month subscription up front, that expense should be evenly spread over the next 12 months. Accrual accounting is the process by which we do this, providing usable financial statements. This might not seem like that big of a deal if you’re talking about a $120 subscription. But when you think about the sums you invest in new equipment, marketing, or technology over the course of a year, seeing the whole picture becomes crucial.
Without this critical function, your financial statements are gibberish and you’ll likely give up trying to use them for running your business. This knowledge gap on the existence of accrual basis accounting, I believe, is a big reason why most small businesses choose to run on intuition and feel. When all you’ve seen are useless financial statements, why would you want to invest further in something that seems like such a waste?
The Fractional CFO: Your Forward-Looking Partner
Finally, let’s talk about a Fractional CFO. To date, we’ve only discussed the past. Whether it’s your CPA, bookkeeper, or controller, they are all focused on the past, not predicting the future. There are aspects of these three functions that should be forward looking, but the vast majority of their work is focused on “scorekeeping” which includes keeping score with the tax man.
Your Fractional CFO cannot do their job well without a bookkeeping and controlling function in place. And a quality Fractional CFO should be coordinating activities with your CPA. But more so than anything, your Fractional CFO should be helping you translate all of this data, this scorekeeping, and make it useful for changing the outcome in the future.
A Fractional CFO’s Day-to-Day Can Include:
Preparing budgets and forecasts of future performance.
Measuring performance against these budgets and forecasts.
Analyzing performance to understand the drivers of performance variances.
Highlighting areas for improvement.
Assuring the adequate resources are available to undertake a company’s planned activities.
Evaluating strategic investment opportunities.
Managing third-party relationships with banks and investors.
If you want the full picture of the role, take a look at our fractional CFO services.
Why You Need All Four Working Together
When it’s all said and done, the investment you make in all four of these positions will pay you back many times over. If you have all of these roles working in tandem, you will be able to run your business with more foresight, an eye toward strategy, and with fewer surprises. This means you’ll make better decisions, fewer bad decisions, and ultimately make more money today and significantly more in the long-run when one day you’re ready to sell.
Like it or not, the accounting and finance muscle is the most important to develop if you want to sell for a premium. It is the window into the business. With these roles in place and running like a finely tuned machine, you’ll have objective data to run your business. No longer will you rely solely on your intuition or the member of your team who’s most persuasive.
| Role | In plain English | What they handle | When you need one |
|---|---|---|---|
| Bookkeeper | The record-keeper | Writes down every sale and bill, matches your books to the bank | From day one |
| Controller | Foreman of your numbers | Makes it all correct and gets the monthly report out on time | When the numbers stop feeling trustworthy |
| CPA | Keeps you legal | Files taxes, keeps you legal, stays independent | Tax time, and anything the IRS reads |
| Fractional CFO | Co-pilot for big decisions | Forecasts cash, sets pricing, plans growth, values the business | Growing, borrowing, or thinking about selling |
Ready to Find Out What Your Business Needs?
You don’t have to figure out which of these four roles you're missing on your own. At Doescher Group, we help business owners see exactly where the gaps are in their accounting and finance function, and build a plan to close them with you. Book a no pressure discovery call with our team today. We love to meet business owners exactly where they’re at, helping them navigate this unfamiliar financial terrain.
Frequently asked questions
Is a fractional CFO the same as a controller?
No. A controller makes sure the numbers are right and on time. A fractional CFO uses those numbers to look forward and guide the big decisions on growth, pricing, and money. Plenty of businesses need both.
If my bookkeeper also prepares a monthly P&L, do I still need a controller?
What your team members do is more important than their title. If your bookkeeper is preparing month-end workpapers, making accruing journal entries, and presenting accrual based financial statements with accounts like prepaid expenses on your balance sheet, you might have a controller / bookkeeper combo. In our experience, your bookkeeper is probably not a controller, and if you’re asking the question I’d say it’s highly likely you don't have a controller.
Do I still need a bookkeeper if I have a fractional CFO?
Yes. A Fractional CFO requires clean and accurate books. Skip the bookkeeper and controller, and a Fractional CFO is a waste of money. They’ll either be giving advice on bad information, or an overpriced bookkeeper / controller.
Can my CPA just be my CFO?
No. Most tax CPAs work well with a Fractional CFO, but this is not their core role. They may be experts in a specific area of accounting, but this doesn’t mean they have the requisite skills to provide Fractional CFO services. These are two very different skill sets, so they are not necessarily found in the same individual or same firm. That said, many Fractional CFOs are (or were) CPAs at one point in their career, as is the case at Doescher Group.
How much does a fractional CFO cost compared to a controller?
A Fractional CFO usually costs more per hour, because it is more senior and strategic work. But a Fractional CFO costs far less than hiring a full-time CFO and will be more than sufficient for most businesses.
Not Sure Which Seat is Empty?
Spend 20 minutes with us. We'll look at how your finances are set up and tell you whether you need a bookkeeper, controller, or CFO, even if the answer isn't us.
Need a Budget
That Actually Works?
Free DIY Budget Template for
Business Owners
Download our DIY Budget Template, with step-by-step instructions to build a clear financial foundation for your business.
