Recently I have seen some discussion about the definition of two roles: that of a Business Controller (BC) and Financial Controller (FC). In most Western European companies, both roles coexist and there is little misunderstanding what they do. What I do note is that the role of a controller in the US is given a different interpretation and is completely geared towards protection of assets and managing risks. The difference between Financial Controller and Business Controller is hardly relevant in the way they work. Then in emerging economies, there is still a need to define these roles. I am not the type of person that will immediately say they are behind and need to catch up. It is also a very different market environment with an own set of challenge. This attempt is aimed at getting a clear picture of the difference between both. For a more detailed description, I would like to invite you to some specific posts about it.
The variance in exposure to the market lead to a wild and exotic variety in companies. The controller’s role however can be defined quite precisely across that lot. It should be clear I am talking about an average sales company in a normal, open, market economy. And although there is no formal dichotomy between Business Controller and Financial Controller, I’ll have a try here and now. What I do ask you is to let go of any ‘old’ perception of what finance is and does – we are not talking about accounting, and the times that a head accountant naturally evolves into a controller should be left far, far behind. Also, it is clear that a real, ‘hard core’ Business Controller and Financial Controller are quite different personalities.
As the name says, a Business Controller is business and commercial minded. He partners up with other functions outside of finance, almost like a consultant does. He is active, aggressive, externally focused and future oriented. With his strong network in eg. logistics, production and sales, he will build business plans and define ways to identify gaps, opportunities. In order to really know what drives the business, he defines ways to measure and report on the key indicators of it. He will bother with the P&L much more than with the Balance Sheet. He will also need to link into the business model, to tailor his approach depending on the business he works in. Often you will read in a business controller’s job description he also needs to think of ways to identify cost saving opportunities and efficiency gains. It is a social job and he is a real part of the line management and decision taking, including all risks involved.
A Financial Controller will have responsibilities on the accurate and timely reporting of historical information. His job description requires competencies that consist of understanding and assuring the compliance with GAAP, IFRS, SOX and tax norms. The senior Financial Controller will manage the external audit and do the statutory reporting, also to stockholders. An Financial Controller will run reports and controls on Accounts Payable, Accounts receivable, etc. He bothers with the Balance Sheet much more than with P&L. He is responsible on controlling the financing of the business (the liability side, i.c. the loans) and of consolidating the reports from all parts of the company. Finally, he works much closer with the financial systems in the company.
If a BC is more aggressive, a Financial Controller will be more reactive as he has little exposure to external factors. Needless to say, there will be a natural tension between the more central, ‘corporate’ role of a FC and the ‘market unit’ BC. Some other metaphor will place an Financial Controller as the little “CFO” against the BC as a little “CEO”.
Also, see this table:
As a final remark, I hope you noticed I did not mention business analysis as an aspect of these jobs. That is because there really is a difference between what an analyst does and what a controller does (often managing a team of analysts). In real life, both the BC and the FC will increasingly need to have a strong analysis background.
Please also have a look at my new series on the ideal controllers’ task list.
I hope you like the post and I really look forward to your reactions!