As an owner-manager, you should pose the question as What exactly should my controller do? What your controller actually does and what they should be doing may be somewhat different things.
The complexity of any controller’s job is going to vary as a function of your company’s size and complexity. But generally speaking, the controller of most mid-sized businesses should be managing the following functions:
Hopefully, one of the words that spring to mind when you’re thinking about your controller will be organized.
An effective accounting department has a large number of scheduled activities, procedures and controls so your controller can ensure that everything is completed on time and without error.
Your controller should have and monitor a plan with due dates established for all scheduled tasks. In addition, they should examine and streamline where possible the flow of accounting information and physical work involved in the accounting department, consolidating accounting operations where practical to minimize overall costs.
Closing the Books
Closing the books quickly and accurately is the hallmark of an excellent controller. Financial statements and analysis of key issues should be issued within a few days of month end.
Any controller will be judged on the quality and presentation of the company’s financial statements. The controller needs to be thoroughly familiar with the contents of each component of the financial statements, the different formats available, and how to construct them.
The controller is often charged with issuing management reports that not only address financial issues but operational issues as well. These reports need to be useful to their recipients but shouldn’t be excessively costly to produce. The controller should make it a practice to review these reports with their end users to ensure that they’re providing the right kind of information and update as required.
The controller may have any number of ways of measuring the company’s financial performance, but the starting point is typically a standard set of ratios. When a ratio indicates a problem, the controller investigates the underlying reasons in more detail and reports any findings back to management.
The controller is almost always responsible for the creation of the annual budget. This involves managing the overall creation process, informing management of issues related to inconsistencies between budget elements (i.e. cash flow restrictions) and using the budget as a basis for measuring company performance.
Capital budgeting is a series of analysis steps used to evaluate whether a fixed asset should be purchased (or leased), usually including an analysis of the costs of the prospective purchase, related benefits and impact on capacity levels.
IT System Selection
Selecting a new accounting system is the most expensive, prolonged and risky project a controller will likely undertake. It involves defining the company’s needs and matching those needs against the various systems on offer. The installation process involves the methodical conversion of existing data to the new system, creating interfaces to link it with other company systems, and then training employees to use it.
The most basic cash management function a controller is responsible for is the month-end bank reconciliation and looking after petty cash. The controller should generate a monthly cash forecast so they know the probable amount of cash the company will need to have on hand in the near future, in order to decide what bills to pay and ensure that there’s enough cash in the bank to meet payroll.
Credit and Collections Management
This is an area that the controller of an owner-managed business should be actively involved with. These functions have a major impact on the amount of cash on hand and the speed with which it arrives.
Creating customer invoices can be more complicated than you may think. Not only do they need to be structured to accelerate cash collections, the controller needs to accurately record and account for the invoices, accrued revenue and sales taxes.
The value of your company’s inventory is a key component of your reported costs of goods sold, which is a key driver of profitability. One challenge a controller often faces is that inventory records are normally kept by the warehouse staff, so adequate systems and controls must be in place to maintain accurate inventory numbers.
Fixed Assets Management
The controller is not usually responsible for authorizing the purchase of fixed assets, but they are responsible for all related record keeping once the assets are acquired.
There can be a considerable amount tied up in fixed assets, so it is important that the controller has a system of controls over them. These controls ensure that you only buy fixed assets the business actually needs, they make it difficult for them to be stolen, and they help ensure that the items are disposed of properly.
Accounts Payable Management
The controller needs to keep a close eye on the accounts payable function, which can be a bit of a mess in some companies. Traditional payables systems call for the verification of supplier invoices prior to payment as well as detailed reviews of employee expense claims. The result can be late payments, angry suppliers and unreimbursed employees – never a good thing.
The controller doesn’t actually manage equity, but they do record dividends or stock sold or repurchased.
This is an area where excellent work tends not to be noticed, but any errors are immediately noticed by all and sundry.