CFO vs Accountant, What Does Your Business Need?

Many entrepreneurs opt to personally fulfil their own company’s accountancy responsibilities. This is often in a bid to prevent sensitive financial information from slipping into the wrong hands or simply to preserve complete control.

However, if you are currently taking this DIY accounting approach for a small business you are running, you could find that this strategy’s drawbacks start outnumbering the benefits as your corporate journey progresses and the company itself grows. 

The Balance warns that some business owners “delegate accounting duties to trusted family members or staff, but the most successful and savvy entrepreneurs learn quickly that accounting and finances … deserve professional management from skilled financial specialists.” 

In most businesses today, two especially prominent positions of financial responsibility are those of accountant and Chief Financial Officer — or ‘CFO’. How precisely do these roles differ — and which of the two should your company place the stronger priority on filling?

The difference between an accountant and a CFO 

The job listings website Indeed succinctly defines an accountant as thus: “An accountant is responsible for managing and interpreting financial records for either an individual or a business.”

An accountant’s duties could be described in more detail as involving looking at how a business has fared financially and using this data to judge what steps ought to be taken next. 

Specific examples of these duties include analysing data, generating finance reports, and creating and managing budgets. The more technical tasks of filing tax returns and processing payroll can also fall under an accounting professional’s remit.

In contrast, Indeed defines a CFO as “responsible for overseeing the financial activities of the entire business, rather than tracking the day-to-day expenses.” A CFO’s duties include tracking cash flow, financial planning and suggesting remedies for financial problems.

How you can better understand the difference

As you might have gathered from reading the above descriptions, there is some overlap between the responsibilities of an accountant and those of a CFO. However, if you are still struggling to discern where they differ, one analogy used in a LinkedIn article could help.

The article explains that an accountant “is like the forensic pathologist in a hospital” — as, after the patient has died, the pathologist “takes the body down to his dark room at the bottom of the hospital and works out why the patient died.” 

Conversely, a CFO is “like a family/primary physician”, since this particular medical professional “sees patients before they are sick and advises them that if they continue smoking/eating fatty food, they are likely to get sick.” 

Basically, then, an accountant is more of a specialist who focuses on what happened in the past, whereas a CFO is closer to a generalist adept at judging what will happen in the future. 

Accounting is very much a science, as it heavily involves adding up and assessing objective figures. Meanwhile, there is more of an art to what the CFO does — as, though the future of a company’s finances is never certain, the CFO can make well-founded subjective predictions.

Do you have commercial finance expertise? 

There is a lot of jargon attached to the field of accountancy. If you lack in-depth understanding of deductible expenses and accounting for inventory and depreciation, it is essential that you have an accounting professional at close hand lest you make costly mistakes.

This advice applies even if you are currently running a small business consisting of only one or two employees. Generally, though, the higher the revenue that your business brings in, the more that having access to a reliable accountant can prove worthwhile.

This is because, through assisting you in managing your bookkeeping and taxes, an accountant can ensure accuracy in how your transactions are recorded. This, in turn, can make it easier for you to understand whether your company is on the right financial track.

Still, if you want a ‘big picture’ view of how your company is performing financially, you might actually get more value from turning first to a CFO rather than an accountant. For this reason, some startups even opt to have a CFO on board right from the onset.

Alas, it is unlikely that recruiting a CFO to your in-house team would be financially worthwhile until your company is bringing in dozens of millions of pounds in annual revenue. In the wait for this threshold to be reached, you could outsource a CFO.

We urge you to get in touch with our corporate finance specialists to discover CFO accounting services for your business, regardless of its size or status.

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