How to Right-Size Your Finance Department

Outsourced Accounting Matches Skills to Company’s Needs

by Angela Ketterl, CPA

The question of how to structure an accounting and finance department often comes up when companies experience staff transitions.

A bookkeeper leaves or a controller retires, and rather than reflexively hire another person in at the same level and salary, the CEO questions whether the company’s growth or changes in the marketplace may demand a different mix of skills in the finance department.

It’s a smart question to ask.

Especially in smaller companies, people tend to wear many hats. The business owner may try to do everything, or perhaps there is a bookkeeper to pay bills and receive payments, but there is no finance professional on the compliance level or the strategic level. Nor is there budget to pay someone on that level.

Often, finance department staff are given functions and responsibilities that are inappropriate to their skill levels or their titles. Company owners and hiring managers need to know how functions and skill levels match up before they can restructure a finance department appropriately.

Structuring a Finance Department

It’s important to understand the appropriate functions of each position in the finance department, and how skills and education levels should match up. Here’s a brief overview:

  • CFO – The CFO should be a strategic professional, almost like a CEO. Generally, CFOs have a CPA license and/or a college degree in accounting. Some CFOs have worked at accounting firms before moving over to a private company as a controller and moving up to the CFO position. The CFO has a handle on where the company is and where it’s going. He or she looks at the revenue, costs and operational issues and asks what the numbers tell them about business trends. They know if things are trending down and why, and they keep an eye on whether the company is hitting its key performance indicators. On a strategic level, the CFO develops benchmarking metrics and understands how the company compares with peers and competitors in terms of financial performance, and what its forecasts look like. If a course correction is necessary, the CFO advises the CEO and the company’s board on how to achieve it. In a publicly traded company, the CFO also deals with compliance with the SEC.
  • Controller – The controller maintains the accounting records and produces financial statements accurately. The controller position also involves a fair amount of analysis of data, which is ultimately presented to the CFO. On a functional level, the controller takes care of tying out liabilities, making sure monthly sales taxes and payroll are paid properly, as well as taking care of monthly accruals. The controller also makes sure the financial statements are correct and will provide the data needed to produce the benchmarking metrics. The completed metrics would then be given to the CFO for analysis.  This requires a professional whose education, skills and experience enable them to understand the concepts of all these things.
  • Bookkeeper – The bookkeeper is primarily involved with data entry, billing, receiving and posting payments, paying bills, and in some cases paying payroll. There may be more than one bookkeeper to take care of these functions. A bookkeeper may have an associate’s degree in business or on the job training.
  • Accounts Receivable and Accounts Payable Clerks (AR/AP) – Generally, these functions primarily involve data entry.

In many companies, understaffing of the finance department may mean there is not an appropriately skilled or educated person at the right level to perform a certain function. A staffer with the controller title may function more as a bookkeeper and may not understand the various accruals for insurance and taxes, for instance.

While this type of situation may work for a while, in a growing company or a rapidly changing marketplace, eventually a company will need appropriately skilled finance professionals.

Outsourced Accounting Solution

All of this is compounded by the shortage of qualified finance professionals in the marketplace. Finding a person with the education and skill level needed to fill a position in your finance department today is extremely difficult.

Outsourcing finance functions – from AR/AP all the way up to CFO – enables companies to right-size their finance departments. If a company needs CFO-level skills and insights, but not on a full-time basis, outsourcing CFO-level advisory services on an hourly basis is a great solution.  This allows a dedicated professional to get to know the company and its goals, so they are able to meet their individual needs. The same applies to all positions in a finance department.

If you would like to discuss how you can right-size your finance department with outsourced accounting services, contact your Adams Brown advisor.