Why a Controller is Crucial to Any Modern Business Model

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In just the last two decades of business our country has seen some of the most egregious accounting scandals in history. Billions of dollars have been lost to both owners, employees, stockholders, and partnerships due to these purposeful manipulations of company funds. Not only has money been what’s lost, but people’s lives and reputations.

While the majority of these accounting scandals were due to the shady workings and greed of just a few people, millions of others lives have been affected. There are a few names that are now synonymous with bad business: Enron; Bernie Madoff; The Lehman Brothers. Each of those (along with plenty of other examples throughout history) are cases of financial fraud.

Enron Corporation was a US energy services company based out of Huston, Texas. In 2001 it was discovered that the company’s CEO, Jeff Skillings, and Ken Lay, had purposefully lied about billions of dollars worth of debt on their balance sheets. The goal was to hide the bad debt while inflating the company’s earnings. As a result, shareholders lost a collective $74 billion dollars, when Eron’s share price collapsed from $90 to $1 within one year.

The Lehman Brothers was a powerhouse financial service firm based in New York City, and easily one of the largest investment banks in the United States. During the 2008 financial crisis, as things were collapsing and truths were quickly coming to light, it was discovered that Lehman had hid around $50 billion in loan allocations, disguising them as sales with the use of accounting loopholes. This maneuver gave the impression that Lehman had $50 billion more in cash reserves, rather than $50 billion in toxic assets.

The point in sharing these few names and stories is to reinforce the purpose and necessity of what are called Financial Controllers in modern business, but just what is a controller?

What is a Controller

A financial controller is a person who has oversight and responsibility for all of the accounting-related activities in a company. This includes things like managerial accounts, financial activities, investment earnings and the like.

A controller’s role is to assist in the preparation of operational budgets, while seeing to the proper and honest reporting of financial earnings. They work with collections and the analysis of financial data. Though they may not have direct work with the budgets, a controller purposefully oversees the changes, variances, and trends that emerge financially against the earnings and overall budget.

As a financial controller, an individual is essentially a company’s lead accountant, and as such oversees all of the duties related to those processes to ensure that a company’s ledgers consistently and accurately match up with the earnings and losses. At the same time, they act as strategic controllers helping with important decision making, financial forecasting, and budgeting.

As a lead, senior financial position, the process of becoming a financial controller involves considerable experience with accounting and tax policies so that they can help others stay honest with when and how things are reported and kept track of, not just for the company’s sake but others who have a vested interest in the business.

Accountant vs. Controller

Where a controller is involved in a company’s financial accounting processes, they may not necessarily do any direct accounting. With financial management, a controller is meant to ensure that financial data are recorded with consistency and accuracy, whereas the broader function of an accountant is to work more with the details which make up the financial history of a company.

An example of this is that, where a controller may oversee the accounts payable department, the process is unrelated to the actual internal accounting transactions. Also, where an accountant payable clerk sees more of the responsibilities of all liabilities connected to invoices, a controller looks over more of the accuracy and timeliness with which those invoices and payments are processed.

The Importance of Financial Controller

While there are many specific reasons that controllers are important, the bottom line is that these people have a huge sway in how an organization holds to financial policies and procedures. Controllers play a critical role in the processes of identifying the opportunities that improve operational efficiency not only on the financial side of things, but through financial means. Some of their other tasks include effective management of cost-efficiency, talent management, and even the technological upgrades that can automate financial functions.

These people are important because they hold in balance the risks associated with financial reporting and, seeing that things are done correctly, make sure that all persons — no matter their title— are held accountable for their actions. As such the type of person that should be employed as a financial controller should demonstrate impeccable ethics so that every party involved, from the summer intern to the seasoned CEO, all know what and how the financial health of a company flows.

Without the accounting team, and the financial controllers oversight of the intricacies in bookkeeping, poor, impulsive, and dangerous business decisions can be made. Without this type of ethical, efficient oversight, companies may be at risk of becoming the next historical business scandal.

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