by Garrett Fisher
March 18, 2013
Companies make a grave mistake when viewing all accounting and finance positions as equal. In a time of need, it is all too common that an administrative assistant equals a clerk who also equals a professional accountant. Making these staff mistakes results in problems that manifest themselves over time (as opposed to initially). The cost to repair the damage as well as the opportunity cost of financial and related operational mismanagement are colossal compared to the task of sizing an accounting department properly.
Accountants are not Created Equal
The most significant issue to staffing an accounting department is to understand that not all accountants are created equal. For example, in the aviation field – not all “mechanics” are created equal. There are shop laborers who sweep the floor, mechanic assistants, apprentices on the path to licensure, mechanics themselves, inspectors, managers, engineers and finally director-level management of operations. To assume that someone who can lift a broom can also lift a wrench and therefore can certify an aircraft to be put into service is ridiculous. Likewise, a secretary who answers the phones is not the same as a clerk who keys transactions. Clerks are not the same as accountants who maintain the status of overall financial statement integrity. Accountants are not necessarily managers – and certainly are not financial strategists worthy of reporting directly to the chief executive. We will analyze various common positions in the accounting industry so as to best determine what kind of staff member a company needs.
|Position||Very Small Biz||Small Biz||Medium Biz||Large Biz|
Clerks key line transactions – Accounts Receivable, Accounts Payable and Payroll. In organizations with a full accounting department, clerks will usually have one of these roles and spend their time routing paperwork for necessary approvals and keying them into the accounting system. In some companies, an AR clerk may do AP as well.
The larger the company gets, the more the position becomes like a silo. Entry duties and approval get separated as the company grows – and even further coding gets separated from entry. The most extreme production example is when an AP clerk keys thousands of invoices per week. The engine of the accounting department efficiently manages each task such that mass production is possible.
In small companies, an AR or AP clerk may double for each other, may also answer the phones and open the mail. Of course, they see the invoice from start to finish – approval, coding, entry and filing.
The most common pitfall is to assume that, because a clerk sometimes does administrative tasks – that an administrative assistant can do clerk tasks. Not true! Clerks follow basic industry guidelines and rules as promulgated by accounting management – and when those rules do not get followed – the financial statements end up with significant problems.
Clerks do not manage other staff members. While large companies prefer college education, many clerks have their abilities proven by experience.
A bookkeeper is a unique position for small companies. They are responsible for almost all accounting functions: AR, AP, payroll, journal entries and possibly basic financial statement production. They usually report to an outside CPA, a consulting Controller or directly to the owner. Bookkeepers do not supervise other staff, often get mixed with operational and administrative tasks and may “wear many hats.” The most common qualification is common sense. They may have some college education – though it is not a solid requirement.
Accounting Supervisors and Accounting Managers
Small companies do not have accounting supervisors or managers. Staff in this position manage clerks and/or bookkeepers – and their job is largely supervisory on a staff level – vs accounting expertise. They ensure that the flow and balance of work remains equal, that deadlines are met and that rules, as provided by Controllers and CFOs are adhered to. Volume is the key qualifier defining a need for this kind of role. Supervisors and managers are found in larger companies. At least a 2 year degree and often times a 4 year degree is required for this kind of position – and their experience comes from working in the trenches as a clerk or bookkeeper before being promoted into management.
Staff Accountants / Financial Analyst
Staff accountants handle complex accounting functions – involving accounting rules, conditional situations, complex calculations, tasks for financial statement preparation, separation of duties and the like. They post journal entries related to month end procedures and spend much of their time managing the tactical accounting side of the balance sheet. Some treasury/cash flow duties may be delegated to staff accountants – such as cash flow reporting.
Staff accountants rarely supervise other staff in a management function. On the other hand, they outrank clerks and bookkeepers on an accounting skill level – and their duties often involve taking what clerks have done and validating it or taking the data and moving in the next step with it. They notice errors made by clerks (clerks are usually managed by supervisors or Controllers directly).
College is required – with a Bachelor’s degree being the most common. The Staff Accountant position is the first post-college position for many accounting majors and CPA candidates. Staff accountants with a Master’s degree or credentialed as a CPA often are on the track to being promoted into other positions and last a few years normally in the staff position.
Staff accountants are found on the high-end of small business up to the largest of companies.
Senior Accountants / Senior Financial Analysts
Senior accountants take staff accounting functions to the next level. As opposed to simply complex calculations, senior accountants are given more of a forecasting, analysis and planning role – and have more involvement in treasury functions. They are involved in setting up new general ledger accounts, dealing with process aberrations and putting the final stamps of hard work on monthly financial statement preparation – ensuring that granular rules have been followed. The also prepare and troubleshoot KPIs, dashboards and reporting metrics, and prepare data that goes to various departments for use in managing the business. Most of their work is done using complex spreadsheets or other financial management software.
Senior accountants may supervise staff accountants – though that is not always the case as the Controller may supervise all accountants directly – with Senior Accountants clearly having a higher accounting skill requirement.
College is a must – with Bachelor’s degrees plus experience as a minimum – and Master’s degrees with CPA credentials being quite common in the position. Senior Accountants are usually found in mid-size and higher companies. The Senior Accountant position is often a stepping stone to being a Controller.
Controllers are the mainstay of the accounting department. They are managers – managing all day to day accounting positions: clerks, accountants, analysts, supervisors and managers. They are responsible for all accounting functions: vendor and client matters, internal controls, cash flow/treasury, banking, payroll, accounting software, processes, procedures, financial statement preparation and the relationship with the outside CPA firm. They interface regularly with ownership. If a CFO is involved, the Controller manages all accounting functions whereas the line is drawn where the CFO manages finance functions. The CFO and Controller work closely together.
Controllers normally do not have a CFO with small businesses and report directly to ownership. In large small businesses and higher, there is usually a Controller and a CFO.
Controllers must be excellent managers – as most of what they do is involved with building and running an accounting department – and there must be backup procedures in place for staff absence and turnover.
Controllers have Bachelor’s to Master’s degrees with at least 10 years of solid, progressive accounting experience. Larger companies prefer a CPA – though relevance of the designation diminishes the smaller a company gets.
The Controller position is a confusing one – as some small companies call a bookkeeper a Controller (inaccurately so) and some large companies have high paid and very skilled Corporate Controllers managing very large accounting departments. The fact that compensation ranges from as low as $40,000/yr to over $150,000/yr is evidence of the “flexibility” applied to the title.
Chief Financial Officers
CFOs are the highest ranking accounting and finance position. They oversee the Controller and all other accounting and finance positions within the company. While the Controller manages day-to-day accounting functions, the CFO is concerned with capital, financial structure, corporate vision and strategy – and ensuring that the ensuing accounting department stays in line with those stated objectives. CFOs get involved with day-to-day treasury management when there is a crisis – working with cash flow problems and bringing in outside financing as needed.
CFOs manage share capital, debt facilities, and assets and concern themselves with timing of purchases and sales of company property. They also oversee hedging and risk operations – and have a constant pulse on the market which the company operates in to keep themselves aware of risks to the company’s position.
CFOs are part of executive discussions on new business ventures, divesting underperforming operations and other significant business decisions. CFOs are part of the three main C-level positions: CEO (Chief Executive Officer), COO (Chief Operating Officer) and CFO. When the CEO post is suddenly vacant, the CFO is often called upon to be either the successor to the CEO or to be the interim CEO until one is found.
College education is required – and CFOs usually go to excellent business schools with finance and accounting degrees. They may or may not be a CPA. It is impossible to educate all of the characteristics necessary to be a good CFO; education is a compliment to natural management and business skills that the person must have. CFOs have 20 years or more of experience – and have a knack for the business cycle and what makes money and what does not.
CFOs of large corporations are highly paid – with large incentive and stock option plans. CFOs of small companies can have similar complications that Controllers do – where business owners are inclined to label a lower functioning position as CFO when it is best called something else. Nonetheless, they are a necessary position from the high-end of small business to the largest of companies.
Chief Financial Officers (Consulting / Fractional Use)
Fractional-use CFOs have the qualifications of a full-time CFO. They are typically found in businesses that are smaller than firms where the need for a full-time CFO is obvious. High-growth, tech and startup firms gravitate toward these kinds of CFOs as they have needs for high expertise albeit at low volume.
Fractional-use CFOs also are found in more problematic situations – where the lack of a qualified CFO has caused structural problems and pain quantities have created the need to ask for some assistance. The main goal of these CFOs is to fix a long-running problem, help push the business forward and prevent additional structural deficiencies. There is a lower focus on day-to-day matters.
Qualifications for fractional-use CFOs are similar to full-time CFOs except that there is an added emphasis on a consulting background. Spending a significant portion of one’s career at the same company is a negative as the opportunity to learn multiple best practices does not exist (unless the storied career is at a consulting firm or involved unusual amounts of experience).
When a company finds themselves in a position where they need to entrust management of financial affairs into a new leader, its not the time to learn how to do it – it is the time to fix the problem. Like any industry, the accounting and finance industry is nuanced and filled with significant skill overlap for similarly named positions. With proper matching of skills to needs, companies can successfully place adequate leadership and staff resources in place and solve the problem that they set out to fix in the first place.