I know a lot of business owners who believe that the person who prepares their taxes—their accountant—should be able to do more than their job.
What I mean is, yes, you expect your accountant to tell you how to report financial performance to the IRS so you can pay the bare minimum on your taxes. That’s taken for granted. But you would also love for them to give you strategic and tactical guidance about the operations of the company. They’re the money experts, right?
The expectation is that this accountant will somehow help you, the business owner, manage the finances and growth of the business in a world-class way.
It never works.
Unfortunately, many business owners misunderstand that, amidst the many technical complexities of the financial world, their tax-preparing accountants typically focus only and exclusively on taxes. And those folks have more than enough challenging work to keep them very busy with that focus alone!
So, let’s start using the right words for the right jobs to connect with the right people. “Real” back offices have the roles of CFO, Controller, and Financial Planning & Analysis (FP&A).
First: the difference between a Controller and a CFO is this:
So who should a business owner turn to for financial guidance when they’re thinking about launching a new product? Or possibly buying a company? Or buying equipment? Or trying to hire some magnificent executive talent?
In that moment, you might find yourself in a no-man’s land. Your Controller does not want to take on a theoretical set of scenarios in a complicated, assumption-filled spreadsheet, talking through a lot of potential variables over a time horizon you might find difficult to define. A CFO might not have the time either—and will certainly be very expensive if you take them off other projects or add to their fractional hour load to do this kind of planning.
In that moment, what you need is someone who can handle financial planning and analysis on behalf of your company.
This person—or rather, this role—sits just a bit off-camera from your accounting and operations personnel. FP&A helps you map out the money for "what if" questions.
The beauty of FP&A is that it usually lives in spreadsheets. The job is often theoretical, and it allows you to stress-test ideas. You can see how much cash new plans might require, how much time it might reasonably take, and what the returns could look like, depending on performance assumptions. FP&A can also be ruthlessly practical: why aren't we making money on this product or project?
For companies in a season of growth, FP&A functions help separate feasible opportunities from time-wasters. They help optimize ongoing operations, while showing the outcomes of various scenarios to guide both strategy and tactical decisions.
Choosing whether to invest in organic growth vs. purchasing (or even divesting of) a company? Who can run those models and manage through all the interdisciplinary questions to get to a thoughtful set of options? FP&A personnel are usually CFOs-in-training who have the ability to interweave all those different perspectives.
My thesis here is simple: it is dangerous to expect a certain kind of work product from people who are not positioned to deliver it.
Show your Controller a little love and be glad they are structured, rigorous, and investing in getting things sorted precisely. Don't ask them to come on your "what-if" journey into Wonderland—for that, you have a CFO with a trusty FP&A sausage-maker. This simple reference to the 3 key roles (versus "my accountant") will help others help you get where you want to go a lot faster.