Does Your Manufacturing Company Need a CFO or a Controller?

This blog was originally written in 2021. It has been updated with new references and resources.

No matter the size of your manufacturing company, there's likely to come a time when you'll wonder if you need more internal help with your accounting and finances. If you don't have one, you might consider hiring a chief financial officer (CFO) to help develop your finance team, work with your leadership team, and add that ‘next level’ financial strategic thinker to help you achieve your growth goals. But the decision to hire a full-time or fractional CFO isn't as straightforward as you might think.

"Not every company needs a CFO," Brian Sweeney, partner at Redpath, says. It might seem obvious, but it's essential to keep in mind that your company's need for a CFO will depend on your current financial needs, your capacity, and where you want to go in the future. 

Here are some best practices for deciding if and when to hire a manufacturing CFO.

Do You Need a CFO or a Controller?

Smaller companies, for example, often don't have a dedicated CFO. Depending on the size of your company, financial responsibilities might fall to the CEO, a high-level controller, or even a shareholder. 

• A controller, for example, would likely handle common actions like vendor set-up, invoice processing, payment remittance, accounting software record-keeping, and purchasing functions.
• A controller will also produce reliable month-end financials by knowing the numbers, analyzing the actual budget, and managing current compliance needs. 
• A typical controller doesn't usually fill a strategic advisor role for the leadership team.

For that reason, Brian notes the manufacturing CFO is a role that's "more likely to grow out of need" – that is, the function is often filled in response to capacity than to create growth in the company.

[Not sure what your manufacturing accounting needs? We'll help you find out.]

The main difference between a CFO vs a controller, Brian says, will depend on what aspect of your finances needs more focus. 

"A CFO is more forward-looking," he says, advising on the moves a company needs to make to remain financially viable in the near term and beyond. Controllers, on the other hand, "typically focus on historical information and the present state of your finances." 

Of course, all are essential elements of keeping your manufacturing finances accurate–but getting help starts with knowing where you need it most.

How to Know It Might Be Time for a Manufacturing CFO

"As your organization grows and becomes more complex, a CFO might be needed," Brian says. That realization might not happen at once. It might grow over time, as everyday financial work mounts. Brian says you should ask "base level" questions like these before choosing to hire a CFO:

• Are key decision-makers being given timely and accurate information?
• Is anyone evaluating external relationships like insurance, risk mitigation, and banking?
• Who's managing financing terms for your company?
• Who is analyzing cash flow related to financing equipment and facilities?

You might also realize you need a CFO at a key punctuation point in your company's financial roadmap. Manufacturing companies might consider hiring a CFO for things like:

• Buying a new plant
• Purchasing new equipment
• Seeking larger funding
• Financial modeling future cash flow needs
• Understanding key financial drivers and holding the team accountable for achieving
• Proposing financial strategies to achieve future objectives and using key indicators to measure progress

Even at those pivotal moments, Brian cautions against quick hiring. 

"The decision to hire a CFO will evolve over time," he says. When manufacturing companies consult Redpath for hiring advice, Brian says it's often because key people in the company aren't getting the financial information they need on time and feel they don't have that strategic advice within their company. It becomes part of a trend rather than a particular inflection point.

"There's no bright line that says, 'You need to hire a CFO now,'" Brian says. But when you do, it's important to know who'll be able to address these higher-level issues and bring financial expertise and strategy to your company – today and in the future.

A Strategic Partner CFO Isn't Always a Full-Timer

Hiring a CFO isn't just about choosing the strongest candidate who can start ASAP – it's about knowing what your company really needs and matching a professional to that niche. Redpath assists manufacturing companies with the CFO interview process to "ferret out whether or not [a candidate is] a real CFO," Brian says.

Because it's a role shaped by your company’s needs, Brian has recommended fractional or part-time CFOs for certain scenarios. These can be independent contractors and non-salaried CFOs experienced in bringing manufacturing finances back under control. They can provide years of financial experience to help guide your company's decision-making without the long-term investment of a full-time hire.

Of course, fractional CFOs come with their own potential liabilities. Their limited engagement means they likely won't have time to understand your business intimately, and they may leave your company if they receive a better offer somewhere else. Weighing all of these factors is essential when choosing whether or not you need a CFO, and if so, what kind of CFO you need.

With several possibilities available, the decision is about creating and filling the most lucrative role for your business. Brian recommends asking questions to envision what a potential CFO would look like at your company: 

"Are they a strategic partner? Or are they someone who's reconciling finances today? Which do you need, and which will bring the most value to your company?”