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Can a CFO replace an accountant?

Posted by  Sjoerd-Jaap Westra

In order to properly discuss this question, a clarification on the definitions and distinctions between these two labels needs to be made. There are several labels or positions that are sometimes used interchangeably in regard to financial management: Controller, Accountant and Chief Financial Officer (CFO). In reality, each position has a distinct role in relation to serving a business.

Accountant

The term accountant can apply to almost any person trained and serving in the accounting field. For our purposes, we are referring to an independent Certified Public Accountant (CPA). One who operates separately from your business and is not a direct employee of your business. His or her role in your business can vary from tax preparation and auditing to engaging in financial counseling and specific accounting services.

Controller

The company controller oversees the entire accounting department. He or she is responsible for preparing financial statements and reviewing them with management. He or she is also responsible for preparing financial budgets for the company and would work closely with your accounting software provider, such as Unit 4 or another ERP software firm. In some smaller businesses, the controller and CFO position are combined. In a larger business, however, the controller would report directly to the CFO.

Chief Financial Officer - CFO

The CFO is a managerial position within a company, above that of the controller. His or her position is to oversee the decisions of the CEO and the board to ensure that they are financially sound, and to take into consideration available resources and regulatory compliance. Risk management is also becoming a large concern for those filling this vital role, especially in the international business environment.

As you can see from the above definitions, the accountant, as we are referencing the term here, operates as an independent consultant for your company, as well as other clients. A CFO, on the other hand, is an employee of your company, much more intimately involved with the day-to-day financial decisions affecting your business.

Why so many layers? Couldn't your CFO or controller prepare your taxes, and provide all the financial counsel and services that you might receive from your accounting firm?

It is likely that your CFO is fully qualified to perform those services. But there are three strong arguments for keeping those separate roles in place.

1. Segregation of duties

The segregation or separation of duties is a standard accounting principle. It is a strong deterrent to fraudulent behavior and provides an additional protection against error in financial records. An accountant provides this extra level of control and risk protection as an unbiased party that reviews your financial records without being subject to the managerial role of a CFO.

2. External audits

Your CFO may be qualified to do an audit of your financial reports and procedures, but his or her signature will not suffice as an unbiased and independent auditor. Your bank, investors and other financial partners will generally require an independent audit or review be carried out on an annual basis. Your accountant will be able to fill this role.

3. Separate focus

Maintaining an outside accounting firm in addition to your CFO position allows your CFO to focus his or her attention on specifics related to your competition and internal financial goals, while the accountant maintains a more generalized advisory role.

Strategic CFO

Interested in becoming a more strategic CFO? Find out how you can become the business partner you want to be in 4 steps with our latest infographic.

Sources:

  1. ACCA: The Skills Needed to Become a CFO
  2. ACCA: Risky Business
  3. Investopedia: Definition of Controller
  4. Yale University: Finance - Segregation of Duties
Sjoerd-Jaap Westra

Sjoerd-Jaap Westra

Within global product marketing of Unit4, Sjoerd-Jaap is responsible for the 'Office of the CFO' suite. This suite contains best-in-class solutions for financial management, planning & control management, and corporate performance management.

 

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