The Controllership function is integral to an organization's finance operations, ensuring compliance and facilitating timely reporting.
The Controllership function is integral to an organization's finance operations, ensuring compliance and facilitating timely reporting.
What, in essence, is a Controller?
Well, the controller works in a function that bridges financial management's operational decisions with its strategic ones.
They work as a steward of all of an organization's financial activities, and from a high level ensure these activities are supporting the organization strategically.
That doesn't mean they work at just a high-level view. From handling intricate processes, to enforcing the most crucial of policies, to ensuring strict compliance, controllers become to foundation of a company’s financial operations.
Hiring a full-time Controller is one of the first major hires for a growing accounting department.
As we explore the role of the controllership function, we'll explain how it maintains the financial health of an organization.
To perform their job well, a controller has to do these four things:
So, let's explore each one and see what it entails.
At the heart of the Controller's role is the oversight of diverse financial processes. These processes range from accounts payable and receivable to budget management and payroll processing. Usually, a controller will have other finance professionals, such as bookkeepers, helping them.
By monitoring these activities, controllers ensure they run smoothly and efficiently and follow all applicable standards and regulations. Their oversight ensures the machinery of financial operations keeps ticking with precision.
Here are some of the primary responsibilities the Controllership function will oversee:
Accounts payable involves the management of all payments to suppliers, service providers, and other creditors. Often, a controller will make sure that these processes are running smoothly, as well as look for opportunities overall for discounts or improved terms.
Accounts Receivable handles the collection of all payments, ensuring that they are collected in a prompt and accurate way. They will often oversee the management of billing processes, the credit controller, and dispute resolutions.
Depending on organization size, a Controller will also handle payroll. Payroll responsibilities include ensuring that employees are paid correctly and on time. They often have access to sensitive financial information. This includes deductions for taxes, benefits, and other items that ensure compliance with labor laws and tax regulations.
Budgeting is essential to organizations. Controllers will often oversee the creation, management, and any adjustments needed to be made to an organization's budgets. This usually includes working closely with other departments to forecast revenues and expenses, as well as tracking performance metrics against these budgets.
Ensuring accurate and decent working capital levels, Controllers oversee cash flow processes that affect this. They forecast demand and cash needs and make recommendations for making short-term investments and borrowing decisions.
Balance sheets, income statements, and company financials. These reports are essential to a business's monthly, quarterly, and yearly financial reporting. Controllers manage the preparation of financial reports to ensure they are error-free, timely, and compliant with accounting standards such as GAAP. They will also perform horizontal and vertical analysis, analyzing trends across the organization.
Many businesses contain significant inventory and production activities, and in this case, controllers oversee cost accounting procedures. This includes the tracking of Cost of Goods Sold, Inventory management, and the analysis of cost trends.
It's very important to note that these responsibilities, along with others, may be shared with other finance functions, which will depend on organizational size, complexity, and structure. In smaller organizations, a Controller may touch all parts of the business, while in larger ones, there may be multiple controllers specializing in key areas.
These controls will include supporting the integrity of financial information, promoting accountability across organizations, and helping to prevent fraud. Controllers have direct oversight over a company’s internal controls and environment. Their role is to properly develop, maintain, and approve all internal controls. Many organizations choose to follow the COSO framework as it provides a comprehensive and widely accepted approach to internal control.
The controllership function ensures that companies comply with all relevant laws, regulations, standards, and internal policies. This often affects financial reporting, taxes, internal audits, and more. This also includes what we will discuss more below, which is ensuring that internal policies such as ethics standards and codes of conduct are adhered to.
Last but certainly not least, Controllers ensure financial policies are adhered to. These can be anything from investment guidelines to reporting and security protocols to department communication policies, which form the backbones of the inner workings of the organization.
As the one who oversees these policies, Controllers must ensure they are correctly carried out as well as communicate with their teams. This enforcement ensures procedural uniformity, minimizes risk, and boosts organizational integrity. The Controller may not be the sole author of these policies; thus, they must proactively identify the correct team members to collaborate with in drafting a policy.
Common Financial policy examples include, but are not limited to:
When looking at the four main responsibilities of a controller, we mentioned that at the top of that list was overseeing financial processes, which included managing financial reporting. Now, given the impact of financial reports on the fate of any company, both big and small, it is worth taking a minute to explore how a controller can play an integral role throughout the whole reporting process.
Whether it's financial data for board meetings, shareholders, or the general public, stakeholders require timely and accurate financial information. Controllers ensure that financial statements, annual reports, and other documents are done on time, error-free free and adhere to the principles of transparency and accountability.
Almost every company, small and large, is responsible for the month-end close. In fact, running an efficient month-end close process is an essential backbone to virtually every business. Usually, public and even privately owned companies will have rigorous financial reporting expectations. They require a fast and efficient close, usually 5 to 10 days after the month end. If something is wrong with a particular financial document, this is where the controller steps in to ensure that all statements are updated and reconciled by working with the internal accounting teams.
For publicly traded companies, reporting to the Securities and Exchange Commission (SEC) is critical to external reporting. The Controller helps ensure these reports are accurate, complete, and submitted promptly. SEC reports are more than just regulatory obligations—they're an opportunity for companies to present their financial health and success to potential investors.
Internal reporting is just as essential to the organization. Being able to provide critical insights to decision-makers to stakeholders, and employees ensures that the organization works as a cohesive environment. Controllers ensure these reports are comprehensive, accurate, timely, and easy to digest, providing the information necessary for strategic planning, budgeting, and other critical business decisions.
Another critical pillar covered by a controller is ensuring compliance. And this includes navigating the intricate web of taxation, which is no easy feat. From income tax to sales tax, payroll tax to corporate tax, the tax landscape is complex and often fraught with potential pitfalls.
Strategic tax planning is integral to this role. As controllers sift through financial statements and data, they must actively plan for how the company can best optimize its tax assets and reduce its tax liability. They will often collaborate alongside tax consultants to ensure that the company navigates the landscape of business structures, investments, special credits, and operational strategies to its best legal advantage.
As mentioned above, the Controller will work closely with outside consultants and specialists supporting the organization's tax processes. They will also serve as the primary point of contact for tax authorities, handling responses and providing necessary documentation when needed.
The tax code has the ability to change, and that can significantly impact the company's tax strategy. The Controller will either need to remain apprised of upcoming changes or work closely with outside experts who can advise on future changes in a timely manner. The IRS has several helpful suggestions on staying informed about current and upcoming changes to the law.
One of the most important aspects of the controllership function is the implementation of strong internal controls—systems and processes designed to safeguard a company's assets and ensure the accuracy of its financial records.
Effective controls mitigate risk, prevent fraud, and promote adherence to policies and regulations. This may involve everything from access controls for financial systems to expenditure approval processes. Controls are designed to either prevent or detect errors and fraud.
Some examples of preventative controls include:
Some examples of detective controls include:
Where possible, these controls should be enforced through the use of technology. With segregation of duties, for example, the financial system should not be fully open to all users, and defined access areas should be established.
Internal controls should be continually tested for deficiencies. When deficiencies are identified, the Controller's responsibility is to act quickly to correct them and enhance the control system's effectiveness. Audits are an opportunity to test the strength of these internal controls. They can make the life of the Controller easier as the auditors will make recommendations on how to improve these controls. The Controller must ensure that controls are reliable and comply with relevant laws and regulations.
Being an effective controller isn't just about what you do; it's also about how you do it. By following these best practices, controllers can ensure they’re fulfilling their duties effectively and efficiently.
Financial processes are not static. They change with business policies alike. They must evolve an organization and respond to environmental change. Controllers need to regularly evaluate all of these processes and policies to best identify areas that they can improve, and ensure that they meet the organization’s operational needs and compliance requirements.
Controllers should be proactive rather than reactive to compliance developments as they arise. This means staying up to date with laws and regulations, planning for all tax obligations, and communicating financial reporting changes way in advance. This ensures companies arent cleaning up issues as an afterthought and that they are prepared for whatever comes their way from the outside business environment.
Responding to the outside environment is one thing, but internal controls are something a Controller can control completely, and they serve as a crucial defense against financial mismanagement and fraudulent activity. Training and coaching employees correctly and strategically on these controls is quintessential to organizational success.
Technology supports every facet of the company's financial operations, and new developments can significantly impact processes. The Controller and every other business leader are responsible for continually looking for opportunities where technology can be leveraged to improve processes. Staying educated on the offerings of large enterprise software players, like Oracle, can help you discover opportunities for your business.
As we look to the future, the role of controllership is poised to change as much as any within the finance function. These changes are already underway and will only continue to accelerate into the future.
Some functions in finance are more affected by changes in technology than others. The controllership function is heavily and immediately affected by new technological developments. With an array of repetitive processes, there is ample opportunity for automation and intelligent technologies. The booming popularity of language models like OpenAI's GPT-3 has made AI an even larger topic of discussion than it was previously. This draws more attention to the pressures put on businesses to find creative ways to stay ahead of the curve.
As the future rapidly approaches, Controllers will not need to be experts in developing and implementing these technologies, but it will be required that they are well-versed in their capabilities and understand the use cases intimately. Controllers are primary leaders in implementing these technologies throughout the organization, as their duties affect almost every aspect of the business.
Controllers work with sensitive financial data, giving them a clear perspective on the areas of opportunity for cybercriminals and the risks to the company. They can guide efforts to secure critical assets and contribute to developing and implementing cyber risk management strategies. The controls established and maintained by the Controller are a primary line of defense against cyber threats. The growing involvement of the Controller in cybersecurity follows the central theme of the growing relationship between the Controller and IT.
So long as stakeholders want to have clarity into the financial health of the organization, controllership will remain vital to operations.
The controllership function is core to the role of the CFO and represents one of McCracken's Ten Pillars of Finance.
In organizations without a Controller, the CFO manages the duties we covered in this article directly.
A Controller supporting a CFO has more of an opportunity than ever to add value to the business and make an impact with their role.
For help running or evaluating the health of your controllership function, feel free to contact us.
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