You would think after 20 years of being an accountant, I would know exactly how to define the different financial functions. Accountant! Controller! Financial Advisor! CFO! Fractional CFO! And we do…mostly. It’s when clients’ start questioning what we do, when their spouse, a friend across the street, online bots, do-it-yourself software, according to them “do the same thing.”
What is an Accountant?
An accountant is just that, an accountant. As defined by the Oxford Dictionary, an accountant is “a person whose job is to keep, inspect, and analyze financial accounts.”
There is no licensing designation, no specialized skillset, no educational requirements, and no standardized practices. When someone refers to themselves as an “accountant”, some clarification is needed. Whereas one “accountant” may work with financial statements, another may only provide “tax” services. It is not even necessary for an “accountant” to work with numbers. They may be involved in the “Accounts Payable” or “Accounts Receivable”, the process of making or receiving payments by contacting vendors and customers but may never actually key in a number.
So really, an accountant could be define d by what they DO rather than what they are.
What is a CPA?
A CPA is a Certified Public Accountant is an accounting professional who has completed years of education in various financial areas, fulfilling experience requirements under another CPA, completed state licensing requirements, and passed the 4 sections of the CPA Exam to finally earn the CPA designation. In addition, annual continuing education requirements and ethics courses to maintain a CPA license.
So now that we have the formalities out of the way, why not simply refer to them as “accountants.” Many mistakenly assume that an accountant is certified, however this is not necessarily true. An Accountant cannot provide audit services or render an “opinion” on financial statements. CPAs can. An Accountant cannot represent you in front of the IRS.
CPAs can. Accountants can prepare tax returns but cannot sign or represent a client in a tax audit. CPAs can.
Let’s look at it another way…
A CPA is always an accountant.
A controller, and in many cases a CFO, are accountants.
an accountant is not necessarily a CPA, controller, or a CFO.
A CPA can further specialize in specific industries (i.e. medical, oil and gas, transportation etc.). A CPA performs the same activities as any general accountant such as:
- Perform write-up services
- Create the general ledger
- Perform Month-End and Year-End Closings and Prepare Complete Financial Statements
- Reconcile Bank Accounts and Credit Cards/Loans
- Maintain balance sheet equity accounts
- Prepare customized industry specific reports
- Administer accounts payable and accounts receivable functions, aging, and adjusting entries
- Prepare quarterly and annual tax computations and related federal and state tax returns
- Prepare financial budgets and cashflow forecasts
- Perform payroll administration functions
- Review and process vendor and employee expense reports
- Assist with preparation and management of the financial audit process
- Implement internal financial controls and procedures
The activities are mainly based on historic data with some foresight, repetitive activities, required federal and state compliance, with a purely financial focus.
So then, what is a Controller, and what do they do beyond what a CPA does?
A Controller or Comptroller, is not required to have a CPA license, however, the knowledge base required to perform as a Controller requires advanced certifications, knowledge, and continuing education.
Whereas general accounting functions are purely financial, a controller needs to consider both financial and non-financial factors in helping management make business decisions. In addition to working on all accountants’ activities listed above, a controller’s activities can also include:
- Cash Flow and Fixed Asset management
- Create, maintain, and implement financial policies and procedures, internal controls, and other risk management functions.
- Select, implement, and maintain internal and external financial software
- Advise management in preparing budgets, schedule expenditures, and analyze variances
- Work with owners on industry trends, Key Performance Indicators (“KPIs”), and company-wide best practices
- Work closely with internal and external accountants on proactive tax minimization strategies
- Prepare customized financial reports summarizing data and trends for profit maximization.
- Monitor internal financial staff, review work performed, and recruit required roles
A controller’s role expands beyond that of an accountant and therefore may require additional certification, skillsets, and specialized education and experience.
At this point, you’re probably thinking, “What the holy heck does a CFO do, then?” I’ll get to that in the next installment.