Introduction
Any organization employs a large number of people with each person having definite responsibilities. As a rule, an employee is engaged in the activities for which he/she is qualified and which cannot be performed by any other person in the company. It is seldom the case that a person has to perform the functions without special qualification. However, the financial department can be regarded as an exception from this rule.
An example of such a rule-breaking is changing of the role (and correspondingly functions and responsibilities) of a controller. These days, the role of a controller is closer to the CFO’s assistant. The obligations of a CFO in any organization are to “ensure the timely and accurate execution of all enterprise accounting functions [including] understanding and consolidating financial, internal and external (SEC and shareholder) reporting, inventory credit, accounts payable, fixed assets, and payroll activities” (Killmeyer & Tudor, 2006). Some of these obligations have been recently overtaken by the controller.
In addition, the controller’s functions have changed due to the technological development and the resulting inability of the CEO to cope with all the activities of the company which acquired more complex environment. This is why the monitoring function of the CEO started to be resting with the controller who is now expected to keep “the CEO apprised of the performance of all departments, product sales, costs and profits, control issues in a variety of transaction processing systems, and the impact of new government taxes and other regulations on the conduct of the business” (Roehl-Anderson & Bragg, 2005).
This paper traces the development of the controller’s role throughout past several decades giving an overview of the traditional and the contemporary roles of the controller, his/her functions, and the areas for which the controller is responsible; the paper also outlines main differences and similarities between the traditional and the new roles of the controller and presents pros and cons of changing the role of this person.
The Traditional Role of the Controller
The position of the controller has existed from those times when the first companies started their functioning. The most drastic change in the controller’s functions occurred in the 1930s. Back then, “the preponderating importance of the appointment was shifted from a passive accounting role of the controller towards a more thorough role” (Linhardt & Sundqvist, 2004). The controllers acquired new roles due to the crash of financial markets in the United States and Europe.
This period is rarely mentioned by the scholars who prefer tracing the development of the controller’s role from the 1970s of even later calling this role a traditional one. Therefore, traditionally, a controller had a role of the accounting officer or a financial planner in the company/organization. This person was hardly more important than the bookkeeper and his/her obligations consisted in carefully recording “all transactions passing through the accounting department, transactions primarily related to the payment of suppliers, the billing of customers, and/or the handling of cash” (Roehl-Anderson & Bragg, 2005).
Sometimes the controller had to issue financial statements, reports, and summaries regarding the financial welfare of the company. The position of a controller could be achieved through clerical ranks “so that the person in the controller’s job was intimately familiar with how to manage the transaction flow and could be relied on to keep the same old systems running forever” (Roehl-Anderson & Bragg, 2005). Regardless the fact that these obligations were more than enough for the controller, this person’s range of responsibilities has broadened significantly and started including new functions which demanded time and efforts.
Traditional Controller’s job Functions
Basically, the controller had four main functions in the organization. These included planning, organizing, directing, and measuring (Roehl-Anderson & Bragg, 2005). Controller’s planning, just like planning of a manager, “involve[d] the determination of the station’s objectives and the plans or strategies by which those objectives [were] to be accomplished” (Pringle & Starr, 2006). With regards to this function, a controller was expected to plan activities for other employees of the accounting department in order to provide the CFO with the timing of work completion. He/she also had to keep trace of transactions and guide the budgeting process through a number of other departments (Roehl-Anderson & Bragg, 2005).
Organizing, in its turn, involved “the division of work into specialties and the grouping of employees with specialized responsibilities into departments” (Pringle & Starr, 2006). This means that basing on the decisions which the controller took while planning the activities, he/she had to use the resources of the organization to implement the plan. This implementation consisted in “exercising the management role in looking at the overall organization as well as the role as the head of accounting, running all of the financial management processes” (CCH Canadian Limited & Shepherd, 2003).
When fulfilling this function, the controller was also responsible for obtaining the services of the personnel, ensuring the department with office equipment, as well as computer software which is necessary to complete the work (Roehl-Anderson & Bragg, 2005). With regard to the directing function, the controller’s responsibility was to stimulate and motivate the personnel for them to carry out their obligations effectively; the controller had to ensure that all the members of the personnel work together with the purpose of meeting the objectives of his/her plan. Finally, the controller’s managing function consisted in his watching over the performance of the organization and its achieving of the plans in order to discover possible mistakes and learn from them.
The Role of the Controller in the Modern Organizations
Over the past several decades, the businesses have grown in size and complexity and started using different means of raising capital. This has added new responsibilities to the controllers making them more involved with strategic planning and, therefore, decision-making. In the modern organizations, the controller became a more valuable member of the management team, because now he/she has acquired access to the company’s know-how and obtained greater knowledge about the company than any of the employees. This is why most of the executives now expect from a controller much more than simple adding up the numbers:
Controllers … become involved in the dynamics of running the business … Moreover, they have “hands on” feel of the operating environment, such as the interrelationships among management, production, and sales … Although controllers must not turn their backs on the traditionally assigned accounting tasks, they must apply a vast body of knowledge to the future prospects of the organization (Shim et al., 2008).
Due to this, “today the controller is seen as an active part of the long-term strategic planning and a part of the corporate management,” (Linhardt & Sundqvist, 2004) rather than simply a person who is responsible for the financial welfare of the company. From ordinary accountants the controllers are gradually growing into business analysts with new technologies changing their job every day. Though a certain part of the controller’s job was overtaken by these technologies, this person evolved “towards a more analyzing role as the techniques and systems are growing more complex and strategic information is valued higher” (Linhardt & Sundqvist, 2004). These changes added to the controller’s job new functions and, correspondingly, responsibilities.
Modern Controller’s Job Functions
As it has already been mentioned, the traditional controller used to have four primary functions, namely, planning, organizing, directing, and measuring. With this role changing over the years, two more functions were added to the job of this person. The first of the controller’s new functions is the financial analysis. Within this function, “the controller is responsible for the review, interpretation, and generation of recommendations related to the corporate financial performance” (Roehl-Anderson & Bragg, 2005).
This function requires a controller to have excellent communication skills in order to interact with the members of the management team and to be able to convey his/her information to them correctly and effectively. The controller’s another function, process analysis, made this person responsible for “reviewing and evaluating the performance of each major process that is involved in the completion of transactions, with dual (and sometimes conflicting) objectives of maintaining tight financial controls over processes while also running them in a cost-effective and efficient manner” (Roehl-Anderson & Bragg, 2005).
Therefore, a view of the controller’s functions which emerges now is that the controller “develops and maintains a management information system, capturing … the past, present, and emerging developments within the organization … presenting … to top management the financial implications of these behavior patterns” (Spiro, 1996).
Together with these functions, the controller acquired a number of new obligations. Some years earlier, the controller had to deal with financial statements and reports, whereas now he/she should “examine and initial all entries for the receipt and delivery of securities owned by the company or held by the trust department, and he should be authorized to make … examinations of all the departments of the company” (Kirkbride, 2009). Thus, now the controller is responsible almost for the overall performance of the company and especially its financial losses. He/she performs the role of “the financial conscience of the company” (Roozen & Steens, 2006); this person should carefully watch over the work of every employee to avoid losses and to preserve the organization’s reputation.
Functional Areas for Which the Controller is Responsible
At present, the controller is responsible for a great number of functional areas. The basic of his/her areas of responsibilities are auditing, budgeting, control systems, cost accounting, financial analysis, financial statements, fixed assets, policies and procedures, process analysis, record keeping, tax preparation, and transaction processing (Roehl-Anderson & Bragg, 2005).
Within these areas, the controller started bearing responsibility for internal audits, coordinating of the budgeting process, successful carrying out of transactions, analysis, allocation, and evaluation of costs, forecasting statistics and giving recommendations for financial improvements, preparing financial statements and analyzing them, recording and analysis of fixed assets, working out policies and procedures related to the development and control of the company, filing tax returns, completion of transactions, and other activities. Nevertheless, despite new functions acquired by the controller, his responsibilities remain “primarily accounting in nature” (Home & Wachowicz, 2005).
Differences and Similarities between the Traditional and New Roles of the Controller
It should be admitted that the similarities between the traditional and the new roles of the controller are only a few. The main similarity is that the controller’s job still focuses on accounting, though now this person deals with a number of other areas connected with accounting. Another similarity is that the controller still has to perform four main functions which the traditional controller used to perform. Planning, organizing, directing, and measuring are four basics of successful management this is why they are unlikely to be removed from the controller’s functions regardless the development.
The main differences between the roles of the controller some years earlier and in the modern time are as follows:
- The controller could advise but was never able to take any decisions. This person used to be more of a counselor who warned the CEO about the problems the company was likely to face. Changing of the role of the controller led to necessity of his applying critical thinking and strategic planning to ensure the appropriate performance of the company.
- The controller obtained the powers of managing people. Now he/she controls the work of other employees and is entitled to introduce changes in the performance of the company’s personnel.
- With the development of businesses and technologies the controller acquired two new functions. Now, apart from planning, organizing, directing, and measuring, the controller performs the functions of financial and process analysis which added him/her new responsibilities and which demand special skills to become a successful controller.
Pros and Cons of Changing the Role of the Controller
One of the greatest advantages of such drastic changes in the role of the controller is that he/she now has an access to the company’s assets and knows the company so well that the risk of his/her getting fired or dismissed on the grounds of redundancy is almost zero. Another advantage is that this profession became more important in the company; earlier, the controller could be replaced by an ordinary bookkeeper, whereas now this person is almost irreplaceable. In contrast, the greatest disadvantage of changing the role of the controller is that, together with the increased number of duties, the controller’s responsibility has also increased. This means that the controller’s mistake may have serious consequences for the company which employs a number of other people who, in this case, may lose their jobs.
Conclusion
The controller’s role in the company has tangibly changed over the past years. It has grown from the role of a bookkeeper to the one of the business consultant and even business partner. In the process of this growing, the controller acquired two new functions in addition to those four which the traditional controller used to have. Thus, currently, the controller has six main functions to perform; they are planning, organizing, directing, measuring, and carrying out financial, as well as process analysis. These new functions have significantly diversified the controller’s work. All these changes were mostly beneficial for the controller for he/she became a valued and irreplaceable person in the company. The only disadvantage of these changes, however, is the increased responsibility which the controller now has for the company and its personnel.
Reference List
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