Stairway Consulting Inc.

You’re not alone.  Cash flow for new and small businesses is tight and paying for a full time qualified controller is just not in the budget – if you even have a budget! 

In house vs. external
In my last article I talked about the value of using a professional external bookkeeper instead of an on staff one, especially if you aren’t a “numbers” person yourself.   This provides far more confidence that the work is being done right and will save time in the long run - and money since your accountant will be doing the corrections at closer to $200 per hour.  While that wisdom holds true, however, the fact remains that even if the total number of hours is less, that still translates to an hourly rate of some three times as much than if you keep it in house.  So what can you do?

Controller on call
A good compromise is to engage a “Controller on Call” or part time controller.  If you can’t afford an external bookkeeper to look after your books on a day to day basis or want the added value of office help that often comes with an in-house bookkeeper, then consider the services of a controller on call to supplement your internal bookkeeper.  A qualified full time controller will run around $100K a year; a CFO $150-$200K.  But who says you need them full time?

The controller
In an established company, the controller oversees the accounting function and ensures that the data that is being entered (often by an in-house bookkeeper) is entered accurately and according to Canadian GAAP (Generally Accepted Accounting Principles) and that all financial controls are in place, including separation of duties that would otherwise not be possible with a single bookkeeper.  They ensure that the books are “accountant ready” when it comes time to do your yearend financials and tax return.  In addition - and this is important - the controller ensures that the financial information recorded is reported to management in a meaningful and timely way that management can use to steer the company.   Every company, large or small, needs to fill this role, but in a smaller company, this need not be full time.  Much like food, quality generally brings more joy than quantity.

How much time do I need a controller each month?
At first, the controller will spend a little more time as they ensure that systems, controls and procedures are properly established.  If you use an in-house bookkeeper, they may have already set up systems according to what they did in another job or just what made sense to them or you when they first came on board.  But that doesn’t mean that it’s right.  The controller will establish things like a functional chart of accounts, software set up, petty cash protocols, signing authority, AP, AR, payroll procedures etc.   They should also put into place certain reports that you and your leadership team can use to keep the company on track on a weekly or bi-weekly basis.  They will help to establish budgets, a perpetual business plan and monthly financial reporting.  The actual number of hours required for this will vary greatly depending on what systems are in place, the nature of your business (for instance large inventory components, manufacturing, construction job costing etc. bring in more complexities to sort out) and the competence of your bookkeeper. 

Ongoing
Once these systems are established, the bookkeeper will be the one to maintain them with a periodic visit from the controller perhaps once a month or once a quarter to ensure the books are “clean” or accurate.  This will normally involve a General Ledger review and verifying that the month end files are complete.  Any complex transactions can be verified at that time.  This need not take more than a few hours a month and while the rate is higher than the bookkeeper’s, it will be lower than the accountant’s.

The CFO
This role becomes more important as the company grows bigger and you are seeking advice around financing, investment and long term strategic direction.  In smaller companies, this role can be filled by the controller but eventually, a higher degree of expertise and experience will be required.  In addition, having somebody with these qualifications brings expertise to the leadership team and credibility to the company when dealing with third parties such as bankers and investors.  Once again, a company may not need this role to be filled full time at first and so bringing on a CFO on Call, or part time CFO as and when needed is an excellent transitional solution.