Why Your Bookkeeper Isn’t Ready for the Role of CFO

Would you hire an electrician to design your building or home? Probably not! No doubt you’d want a master electrician on the team, but when it comes to creating a building strategy, anticipating potential trouble spots, thinking about how different functions and systems interact, and overseeing the general contractor, you’d want a trained architect, someone who specializes in building at the high-level. It’s the same in business. A bookkeeper is an invaluable member of the team – but does he or she provide the high-level financial services you need as your company grows?

The short answer is “No.” To understand why, it’s important to understand the distinction between bookkeeper, controller, and CFO:

A bookkeeper maintains financial records for a business, keeping track of sales, purchases, payments, and other transactional information. If a bookkeeper is analogous to an electrician, a controller might be a general contractor. He or she has oversight over day-to-day financial activities, including managing bookkeepers, preparing financial statements, creating budgets, approving customer credit, implementing basic accounting and financial systems, and more.

The CFO is, as we mentioned, the architect. He or she is responsible for overseeing the company’s financial functions, developing projections, and helping guide overall strategy.

How Do Bookkeepers Become CFOs?

Say you own a small company. One of your first hires is a competent bookkeeper. Smart move. You need someone to keep accurate records and ensure transactions – from paying vendors to cashing checks – are handled in a timely way. Now your company is growing…and growing. You hire more employees, you attract more clients, maybe you’re considering an IPO or a move into franchising.  Everyone who has been with the business is elevated, and you promote your bookkeeper to controller or even CFO.

To be frank, this move is not smart! Why? The bookkeeper is now in over his or heard. As CEO, you won’t get the accurate information you need in a timely manner, if at all. You get no insight into the financial function of your own business.

Is this because your bookkeeper is incompetent? Not at all. This person could be a stellar bookkeeper – and that’s exactly the point. He is a stellar bookkeeper. A controller or CFO is a whole different story: we’re comparing apples to oranges here. Sure, they’re both related to the financial function of the company, but that doesn’t mean that experience as a bookkeeper prepares someone for the challenges, rigors, and responsibilities of senior financial management.

Can a Bookkeeper Become a Controller or CFO?

Yes. Just like a general contractor can become an architect! These are not positions that people learn on the job. They need specific technical skills in place before they take on these roles, and a degree in accounting is a critical first step.

What makes companies profitable? What kind of ratios should I be looking at? This isn’t knowledge that you pick up on the job, regardless of how quickly you learn or how adept you are. That foundation needs to be built – and not just built but strong and solid – before you step into those roles.

A bookkeeper should only be promoted to controller or CFO if she has specific accounting, management and finance experience and the applicable degrees. Expecting him to do the job of a CFO is not only unfair to him – it’s incredibly unfair to your company and its future.

Get the High-Level Financial Help You Need

As skilled and valuable as an electrician is, he is not an architect. As trusted and accurate as your bookkeeper is, he is not a controller or CFO. This isn’t a judgment of his past performance or of his ability; it’s a matter of education, training and experience. Asking your bookkeeper to go beyond the scope of his current duties without the proper education and experience undermines the financial foundation of your company.

But I can’t afford a controller or CFO. But my bookkeeper has been with me for years. But I’m not sure if it’s time or if we’re ready. But…. But there is no substitute for a trained, experienced CFO to help guide your business to the next level. Flexible part-time CFO help can ensure your company has the strategic – and affordable – high-level financial expertise it needs to handle growth.