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Part-Time vs. Full-Time Bookkeeper, Controller, and CFO?

Posted on May 1st, 2017

Jack Kern
Owner, President
Outsourced Accounting Department, Inc.

In my previous article, “Why Outsource Your Bookkeeping,” I talked about the advantages of outsourcing this unpleasant task.  In this article I will discuss the differences between accounting department roles, and when it’s time to bring them in house.

To start, this article from the October 2016 issue of Entrepreneur Magazine provides a good overview of accounting roles: “How and When to Grow Your Company’s Accounting Function.” One role the article leaves out is that of the Controller, which falls between bookkeeper and Chief Financial Officer. The difference between the two is that the Controller’s position is more of an accounting role, while the Chief Financial Officer (CFO) role is more “big picture.” In reality, sometimes they are combined into one position, which I believe is what the author of this article was assuming.

In our business, the organization chart would look something like this with the client in the traditional role of “Chief Executive Officer,” and the boxes in red are the services we typically provide:

Some good job descriptions of the various accounting department roles are footnoted below in an excerpt from a booklet I obtained a while back published by Robert Half International[ref]Job Descriptions[/ref].  For our purposes here, I will discuss only a few of the basic roles needed by small businesses, starting with the bookkeeper.

As indicated above, bookkeeping is essentially a data-entry function. Some bookkeepers understand basic accounting, others do not.  I’ve found that there are numerous bookkeepers out there who “know”QuickBooks, but they don’t understand the accounting effect of what they are entering.  In our business, the data entry may be performed to a degree by the small business owner using QuickBooks, and to a larger extent by a part-time bookkeeper on our staff, or in some cases it’s performed entirely by our staff person when the owner doesn’t want to have anything to do with bookkeeping.

The next level up then is that of the Controller. This is more of a traditional accounting role which places more emphasis on financial reporting. The Controller reviews, adjusts, and closes the books after everything has been entered and reconciled by the bookkeeper, and then issues the financial statements to the client.  This level of service is where our firm differs from those individuals or firms that provide only “bookkeeping” (QuickBooks data entry).

Finally, the CFO role is more of a financial planning and analysis role (FP&A in the above chart), meaning the interpretation and forecasting of financial statements.  (One of my favorite “tongue-in-cheek” definitions of the difference between an accountant and a finance person is that “accountants put the numbers together in black and white, and finance people add color.”)

Obviously, in the start-up stage a business’ accounting needs are very basic and the immediate need is to have an outside CPA firm to oversee and prepare their taxes. But as I have said in numerous articles, tax returns are not appropriate for managing your business, so your books internally need to be maintained differently, and that is not typically what tax accountants do.  Rather, accrual accounting is more appropriate for managing your books internally and making business decisions.  Over time, managing your books this way will also develop a consistent financial history (profitability trend, etc.) that you may need someday for prospective lenders, etc.

While the business is small, the internal accounting can be accomplished on a part-time, “as-needed” monthly basis, with each accounting level remaining more affordable during the early growth stages.  As your business grows larger, the accounting functions become more full-time in terms of weekly hours, and that is when it’s time to consider bringing the positions in-house on your payroll.  While there are no hard and fast rules as to when it’s time to add a full-time accounting staff, I tend to use these rules of thumb:

 

Gross Revenues Accounting Staff Annual Compensation
Start-Up to $100,000 Outside Tax Accountant $500 to $2,000 (Tax Returns only)
$100,000 to $5 million Part-time bookkeeper / controller $1,200 to $12,000
$5 to $10 million Full-time bookkeeper & controller $35,000 + $75,000
Over $10 million Add full-time CFO $100,000 +

 

Obviously, every company’s accounting needs are different, so there will be some overlap between business sizes as to when you actually start adding a full-time staff, and who.  Also, a major controlling factor as to when to hire a full-time staff person is the company’s bottom line profit.  A company with higher profit margins can afford to add staff people sooner than a company with thin margins.  Aside from that issue, as I’ve said previously, most small business owners know when the time is right to add a full-time accounting department staff.  But until that time, it is essential that proper accounting not be ignored, as that is a recipe for financial disaster.

 Related Articles:

Profit vs. Taxable Income

The Difference Between Your CPA and a Controller: M-1

Financial Planning, or Business Turnaround – Your Choice


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