In this modern era, business infrastructure is pretty complicated. From leveraging technology, launching new products, to investing in savvy tools – entrepreneurs need hefty capital to keep their business running. Unfortunately, raising a million dollars every month is impossible even if you opt for an initial public offering (IPO). Therefore, companies need competent corporate controllers who have an understanding of accounting and finance regulations.
More than raising capital, they focus on maximizing profits to reinvest them in the business. Likewise, they administer all money-related matters – financing, budgets, research, and development costs to assess the company’s financial health. After all, the aim is to have a robust financial standing while fulfilling all financial obligations.
In addition to managing financial data, controllers monitor variances and investigate budget deficiencies. They have an eye for detail to detect material elements in statements and reduce the chances of fraud. However, many people confuse their role with the chief finance officer (CFO), who is solely responsible for securing its future. If you are skeptical about it, have a look below. Here we are revealing the role of corporate controller in boosting business growth.
1. Manages Company Data
Today, the business environment is dynamic and agile because digitalization is reshaping business operations. Previously, accountants had to record every business transaction manually, and controllers used to oversee this data. With the changing business landscape, controllers supervise the financial data entry process by leveraging technology. They are up to date with FinTech technology and accounting software, streamlining the entire accounting department.
At the same time, they use their analytical skills to leverage data-driven insights and execute financial strategies. If you have similar skills, see how to become a corporate controller yourself instead of hiring one. It will give a thorough understanding of all financial activities and strategies that governs the business. Similarly, it will familiarize you with tech-savvy data management tools to upgrade your economic activities.
2. Ensures Regulatory Compliance
The accounting world is evolving rapidly. Authorities are identifying loopholes in International Accounting Standards (IAS) and replacing them with new standards. Now, every business has to comply with International Financial Reporting Standards (IFRS). These standards unfold new reporting regulations. For instance, IAS had two types of leases – operating and finance, but as per IFRS, now companies can only record finance leases.
A corporate controller takes full responsibility for ensuring compliance. They are acquainted with all new and old accounting standards and spread this knowledge across the organization. In addition to compliance, they are the primary point of contact for legal, insurance, and banking alliances. Controllers maintain professional relationships with financial intermediaries, helping the company secure loans at minimal interest rates.
Moreover, they encourage companies to actively participate in social activities as corporate social responsibility (CSR) has become essential. In some states, there are specific laws regarding environmental-friendly activities that every business has to practice. After all, social and environmental compliance is equally vital for companies.
3. Administers Invoices & Payments
In today’s era, maintaining healthy relationships with customers and suppliers is vital for business success. Out of many responsibilities, corporate controllers manage vendor relationships to bag the best terms and contracts. They settle credit terms with suppliers, aligning them with the debtor’s credit terms. Thus, when customers make payments, businesses can payback their suppliers, closing doors for cashflow problems. They also initiate long-term contracts with vendors to acquire bulk purchasing and cash discounts on early payments.
Besides this, every business has to ensure state compliance that includes tax payments. Controllers help companies stay on top of changing corporate tax rates and deductibles. They also help companies save up on tax payments through legal and ethical means. Similarly, controllers also have to manage payroll and account for withholding employee tax.
If you believe you can manage this without support from a controller, think about the non-compliance penalties. It will add to the long list of business expenses while damaging your long-built business reputation.
4. Reduces Risk of Fraud
Sometimes, unethical activities are happening at the back end. Executives might be using fake charities to increase tax deductibles and lower taxable incomes. It saves them from hefty dividend payouts, keeping all profits for themselves. A corporate controller ensures due diligence and mitigates the risk of fraud through various techniques. Have a look below.
- Performs internal audits to identify loopholes and business pain points.
- Reconcile bank statements with another person than the one who deposits money.
- Gets approvals of all write-offs from the upper management.
- Use pre-numbered invoices to maintain a standard invoice log.
- Reviews vendor and supplier list to ensure there no fake vendors created by employees to steal money from the business.
- Keeps a close eye on margins and critical stats to ensure there are no alterations.
In addition to internal controls, companies must segregate accounting functions. It means you have to create sub-teams in the finance department – bookkeepers, review committee, authorization team, etc. It reduces the opportunities to commit fraud as only a few employees have access to accounts. The purpose of these financial controls is to eliminate the chances of losses that can put your company into hot water. Identifying potential risks give you enough time to prepare mitigation strategies and overcome those threats.
5. Implements Cost-Saving Techniques
Is utility bills skyrocketing every month? Are insurance premiums too high? One of the controller’s fundamental parts is to get to know the business inside out. They have to discover ways to improve business profitability that can foster growth. Since they can’t control sales, they delve into business expenses and find ways to reduce overall business costs. For instance, if utility bills are taking more than 30% of the total costs, they might deploy an energy-efficient system in the organization.
Moreover, controllers put forward cost-saving initiatives to reduce the cost of goods sold. If you are importing raw materials, they might help you find a local supplier offering the same quality products at a low price. Alongside reducing the purchases, it will eradicate the ‘freight charges’ from the income statement, increasing profits. Likewise, they perform a cost-benefit analysis to see whether installing a plant can save labor costs. These cost-saving techniques vary from industry to industry. Thus, you should know what works for other businesses might not help yours.
Believe it or not but having a finance manager is not enough. From creating financial statements, budgeting, cashflows to ensuring compliance – it is impossible to manage everything single-handedly. Thus, every business needs a corporate controller. They oversee the company’s financial health, prepares budgets, and fulfill all financial obligations. Simultaneously, they define strategic business opportunities and determine the company’s future direction.