What’s the difference between a Tax Accountant, Management Accountant, Financial Controller & A CFO
What type of financial expert does your eCommerce business need?
Whether your business is brand new or you are doing eight-figures in annual revenue, one factor remains the same—strong financial management is essential for ongoing growth.
From tax accountants and management accountants to bookkeepers, financial controllers, or chief financial officers(CFO), these financial experts all play key roles in running a sustainable eCommerce operation.
The only question is, which form of financial management is the best fit for your business based on your current needs?
In this post, we’re sharing the key differences between a tax accountant, management accountant, financial controller, and a CFO to help you find the right match for your company’s current needs.
The key differences between a tax accountant and a management accountant
A tax accountant is typically a third-party independent contractor or accounting firm who’s brought in to handle tax planning and filing for eCommerce businesses (both income and sales tax). These accountants work with clients to produce necessary tax return documents that are required to remain compliant with state and federal tax requirements.
Tax accountants are used to interpreting tax laws and advising a business on any recent modifications. Around the annual tax season, these financial experts further assist businesses by maintaining current tax details and establishing future financial goals on historical data.
This is usually the first financial hire for any eCommerce business—or any business for that matter. While you may be capable of handling finances at the beginning, it’s important to remain compliant with ever-changing tax laws and regulations as revenue begins rolling in. Tax accountants are valuable during this stage of business as they can handle tax filing as well as assess financial records for future planning.
Unlike third-party tax accountants who are brought in to specifically address tax needs, a management accountant usually operates in-house to address a broader scope of a business’s financial needs. These professionals rigorously crunch company numbers to establish budgets and manage business investments.
Where tax accountants focus on state and federal tax requirements, management accountants analyze current market trends to identify potential opportunities for growth and improvement. Management accountants typically work with the head of business or CEO to perform a routine cost analysis of the company’s financial endeavors to provide suggestions for future spending.
Management accountants require a strong foundation of financial as well as management skills that range from generally accepted accounting principles (GAAP) to managing lower-level internal and third-party accountants and bookkeepers.
Once your business is doing early to mid-8-figures in revenue, it may be time to hire a management accountant alongside your in-house financial controller. Everything from expanding payroll needs to increasing accounting demands will require the full-time help of a management accountant as your business evolves.
The key differences between a financial controller and a CFO
Founders often confuse these two roles: financial controller and chief financial officer. While there is some overlap, these roles have significant differences.
Financial controllers are viewed as accounting experts who are responsible for overseeing financial record-keeping, accounting, and reporting. Viewed as a business’s lead accountant, a financial controller commonly maintains internal control policies and spending controls and oversees the accuracy of the company ledger as well as accounts receivable and payable.
In the event of any financial discrepancies, it will also be left to the financial controller to identify and locate the source of the concern and incorporate all parties involved to locate a solution.
Once an eCommerce business hits somewhere between $1-5 million in sales, it’s common for owners to realize it’s near impossible to manage both daily operations and the financial leadership of the company. At this point, it is wise to invest in a financial controller. This role usually starts as a fractional controller position from either an independent third-party contractor or an eCommerce accounting firm, like Bean Ninjas.
Pro Tip: One of the advantages of hiring an eCommerce accounting firm to act as your fractional controller is that many of these firms, including Bean Ninjas, also provide virtual CFO services as well. So, you are getting the benefits of both roles at a fraction of the cost. This also means you can typically delay needing to hire a full-time controller.
As the company expands to 8 figures in revenue, it is common to bring this role in-house. A financial controller becomes the first, full-time employee on the finance team, and they oversee the entirety of the accounting department and ensure all ongoing financial functions are accurate.
On the other hand, a CFO is viewed as the most senior financial hire and is responsible for financial projections and analyzing company strengths and weaknesses to address areas of improvement. These individuals often come from a finance and banking background and have knowledge of company investments.
As business revenue reaches upwards of $25 million, you’ll likely need to bring in the help of a trusted CFO. With increasing revenue comes increasing financial concerns that require the detailed financial planning skills of a CFO. These professionals can further act as the head of finance, from current accounting operations to future financial planning.
Basically, both a financial controller and CFO are responsible for managing and estimating company spending and performance. The main difference between the two professionals is that a financial controller is responsible for overseeing daily financial operations, while a CFO oversees future financial operations.
In sum, the specific role you hire for will depend on a number of factors. For new eCommerce businesses just starting out, a tax accountant is usually all you need. However, as your business grows to 7 figures, that’s where bringing in more senior financial experts like controllers and CFOs become important.