Financial controlling is a financial analysis of a company, a set of information based on which management makes decisions. Decisions supported by numbers. Accounting shows the past, financial results, taxes due. Controlling shows both the past and the future. This means how much of the budget is left until the end of the year, which product generates the highest margin, or which investment causes losses.
Table of Contents
- What is financial controlling in a company?
- Ratio analysis: what indicators show the company's condition?
- How is AI changing financial controlling?
- Do it yourself or outsource controlling to experts?
- Summary: from indicators to decisions
What is financial controlling in a company?
Financial controlling focuses on answering the question of what the financial situation of an enterprise or organization is. Starting from budgeting and cost control, through revenue analysis and financial liquidity, up to information and signals from the market that may affect the company's financial results. We run companies to make money. To earn, spend, invest. There is no other goal. If someone says they run a company only because it's their passion, they are either rich enough to treat the company as a hobby, or... I suggest they use that passion to pay the bills. An enterprise or organization exists if it has the means to exist.
Why does a company need controlling: what are its benefits?
early warning system - profitability is falling, costs are rising, employment is growing, cash levels are unstable; the controlling department can explain what factors are affecting this.
decisions based on numbers, not intuition - regular analysis of financial data (and not only) provides comfort that decisions made are based on numbers, on actual facts, and not on intuition
cost control - financial statements are prepared once a year. Cost management requires regular monitoring of deviations from the assumed budget. Managing costs and profitability is not a task (as many entrepreneurs mistakenly assume) for accounting. This is a typical scope of duties for a controller.
credibility with banks and investors - clear indicators facilitate discussions about credit, valuation, and preparing the company for sale or Private Equity entry
Ratio analysis: what indicators show the company's financial condition?
Financial controlling in a company is de facto a set of information, primarily indicators, showing the company's condition. It's a dashboard, or a traffic light system for management, acting as an early warning system. Financial analysis should focus only on relevant information, those that directly affect the management of the company.
Liquidity: can the company pay its bills?
Liquidity tells whether a company is able to settle current liabilities on time, and it, not profit itself, determines whether the company exists. Companies most often fail not because they cease to be profitable, but because at a given moment they have no money to pay. The scale is significant: according to Coface, in 2024, 5576 Polish companies declared insolvency, 19% more than the previous year.
Profitability: is the company really making money?
Profitability shows what the company earns on and what it loses on. Recently, I prepared a profitability analysis for a medium-sized service company. The owner's surprise was great when it turned out that one of the services was completely unprofitable. The other two covered the losses enough that overall the company was profitable. Information about the profitability of a product, service, or customer segment allows decisions to be made about what is worth investing in and what may need to be "let go."
Efficiency: accounts receivable (DSO) and inventory turnover
Efficiency ratios show how quickly a company converts goods into cash, i.e., how efficiently its working capital operates. DSO (days sales outstanding) tells you how many days, on average, you wait for payment from a customer, and inventory turnover indicates how long inventory sits in the warehouse before it sells. The longer both of these take, the more cash is frozen. This is the most "manageable" group of indicators, because shortening DSO by a few days or faster inventory turnover frees up cash immediately.
How is AI changing financial controlling?
Financial controlling focuses on numbers, data, and ready-made information. Financial reports, HR reports, market analyses, financial forecasts, and benchmarks. These are all data. The methodology of financial controlling, i.e., the way in which data is transformed into indicators and information needed for company management, is also defined. All of this means that a financial controller has many opportunities to perform part of their work not only with the help of ERP and BI systems, but also with AI-based tools.
It is precisely in tasks such as the analysis of key performance indicators (KPIs) that AI excels. From calculating to commenting and creating ready-made decks for management. Does this mean that a financial controller needs to find a new job? No. AI is a model, it generates information based on probability and what has already happened. We can "feed" AI with a huge amount of data, but it is humans who make decisions and take responsibility.
For me, AI is still an intern, one who has read all the books. But still an intern. It lacks intuition and situational awareness. It lacks critical thinking skills, because based on statistics, it will strive to provide the expected (most probable) answer.
Do it yourself or outsource controlling to experts?
The answer depends on the size of the company. Small and medium-sized companies usually only have an accounting department (their own accountant or they use the services of an external company). As we have already established, accounting is the past, controlling is a dashboard with an early warning system. As a financial director, for years I managed both accounting and the financial controller department. These two teams have different competences, knowledge, and skills. That is why in small and medium-sized companies, a better solution is to use the CFO-as-a-service. In Polish, it is called "CFO on demand". The duties of a financial controller and a financial director in a small or medium-sized company are very similar and it is not a full-time job. That is why the optimal solution is to use the services of experts. In large companies, organizations, corporations, a CFO is usually employed, who is also responsible for so-called management accounting, i.e., the analysis of financial (and other) data.
Summary: from indicators to decisions
Monitoring a company's financial performance seems obvious, natural. Because how can you manage a company without knowing the numbers? How can you make decisions "by feel"? Well, you can. And of course, there are many companies that succeed without knowing the numbers. Until they don't.
Financial controlling is not about producing more reports, but about converting indicators into decisions. Liquidity and cash flow tell if the company can pay its bills, profitability if it's actually making money, and efficiency how much cash it's unnecessarily freezing. When you read them together and regularly, they stop being a spreadsheet at month-end and become an early warning system that allows you to react before a problem escalates. Whether you build it yourself or outsource it to an expert is secondary to one thing: numbers must lead to action.
