There comes a time in every scaling company where additional information needs to be extracted from day-to-day financial metrics.

In order for companies to best use their financial information to make quick and smart decisions, a higher level of precision is usually required.

Moving from cash-based bookkeeping to accrual-based bookkeeping is a perfect example and one we see often. Matching expenses and revenues to the months they occurred in provides a more accurate picture of a company’s operations.

Providing more visibility and owning the financial statement process are key tasks that a controller can help with.

WHAT IS A CONTROLLER

A controller in every company will have various duties and responsibilities - so it’s difficult to pinpoint the exact tasks that a controller presides over. That said, typically, a controller oversees a large portion of the finance function at a company and ensures that the day-to-day operations of a finance department are humming.

A controller’s tasks may include, but are not limited to:

Managing the accounting staff of an organization
Ensuring month-end procedures are completed in a timely manner
Preparation of month-end and annual financial statements
Preparation of working papers to streamline year-end financial reporting
Create accounting policies and ensure the rest of the team (bookkeeping, accounts payable/receivable, payroll) are abiding by them
Strategic planning and advice
Managing KPIs

The bookkeeping, payroll, and accounts payable/receivable teams perform the day-to-day functions for a finance team, including data-entry, while the controller, using processes and financial acumen, summarizes this financial information and acts as a liaison between the rest of the finance team (i.e. CFO, Head of Finance or CEO).

IN-HOUSE VERSUS FRACTIONAL CONTROLLER

Controllers are expensive hires and a company may either not need a full-time position for the level they are at or they may not be able to afford a full-time internal hire yet.

That’s where a fractional-controller can come into play.

HOW CAN A FRACTIONAL CONTROLLER HELP YOUR COMPANY

Amongst many things, a fractional controller can take the financial data presented by the bookkeeping team and engineer it in a way where it’s easily digestible and relevant to the rest of the finance team and company stakeholders.

Here are some of the popular controllership services that we, ConnectCPA, provide:

MONTH-END CLOSING PROCEDURES:

Ensure revenue and deferred revenue entries are accurate

For example, you may be a SaaS company who collects up-front annual subscription payments (rather than monthly). The annual lump-sum payment must be allocated correctly over twelve months to account for the revenue in terms of when it occurs (i.e. deferring the revenue over the subscription period).

Ensuring prepaid entries are accurate

On the other side of the coin, you may pay an annual subscription for a product or service and will need to categorize this expenditure over the period that it relates to (i.e. if you paid for an annual subscription, you wouldn’t record the annual subscription in your books as an expense - but rather a prepaid expense - and you would have the bookkeeping team allocate a certain amount of that expenditure on a monthly basis to your expense accounts).

Month-over-month variance analysis

A month-over-month variance analysis entails a review of the current month’s financial information by revenue and expense categories and comparing it to the previous month (category by category). Because the previous month would have been reviewed already, it serves as a baseline measurement for comparison purposes. A variance analysis allows you to look for any red flags, discrepancies or numbers that jump out at you because the variance from the previous month is significant.

ANALYSIS:

Budget vs. actual analysis

What good is a budget without the ability to compare it to actual figures to understand where you fared better and where you may have fared worse. A budget analysis allows companies to set goals and objectives and iterate as time goes on. Comparing a budget to actual figures provides an opportunity to make adjustments to your operations to ensure targets are being met.

Margin analysis

One of the most important metrics on a financial statement is gross margin. It provides you with an understanding of the inputs, from an expenditure standpoint, and how they relate to revenue (i.e. what level of expenses are directly correlated to servicing revenue). Analyzing this metric on a consistent basis is a worthwhile exercise because, just like budgeting, it allows you to make corrections and adjustments throughout if an improvement is in order.

Cash Flow forecasting

The ability to forecast revenues, expenses and cash is paramount because it provides you with a viability plan. Forecasting allows you to experiment with certain variables and inputs to determine where your business will be in the future (whether it’s one month, three months or twelve months and beyond). You can also reverse engineer your operations in order to try to achieve a forecast (i.e. if you know you want to hit $X revenues in twelve months, you can work backwards to determine what level of products or services need to be sold and at what price in order to achieve a specific target). This allows you to make adjustments in the present time to hit future goals.

FINAL THOUGHTS

Fractional controllers can add a lot of value if it’s the right time for your organization. They can shore up your accounting function and provide you with accurate and reliable information to help with business decisions, without breaking the bank for a full-time permanent hire. A fractional controller can be a great stop-gap solution until you’re ready for a full-time hire.

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