10 things ceos of start-ups should think about their financials

10 thingsCEOs of start-ups should

think about their Financials

Ciaran O’Donnell FCCA

Think!10 things I think you (the CEO) should also think about. Not for my benefit but yours and the value they will add to your business now as you nurture your idea and plan for growth.

There are other things but these 10 are based on my experience working with start-ups and early stage businesses like yours.

Ciaran O’Donnell FCCA

01impress your Board

Produce a clean financial report for your Board which includes a short commentary, high level P&L, cashflow and balance sheet (so minimum 4 pages). You can add

forecast, slick graphs, KPIs, etc. for further bonus points.

Ciaran O’Donnell FCCA

02kick the tyres

Your forecast is a series of ifs. It’s very unlikely you’ll deliver these ifs (i.e. Year 1 revenues, Year 3 profits or when you reach cashflow breakeven). Focus on initial milestones, the real cost

of getting to them and the revenue drivers in the first 6-12 months. Give the (leap of faith) assumptions a good kick!

Ciaran O’Donnell FCCA

03love analysis

The real world has more than 10 x data points than your revenue forecast. So you need people who are analytical,

love excel, jump into data and turn it into information, are able to do a reconciliation and ask ‘why’ 5 times to

get to the real answers.

Ciaran O’Donnell FCCA

04customise your books

Adapt the list of default general ledger codes (aka Chart of Accounts) on your accounting system to reflect or mirror your

forecast. It will be easier to track actual costs vs. forecast (at a high and detailed level) and you can also reforecast quicker. Just make sure your forecast is well structured!

Ciaran O’Donnell FCCA

05profit is not cashflow

The ‘indirect method’ explains cashflow from the bottom line on your P&L to how much money you have in your bank. It is the best method for you to understand, review and present

your cashflow to your Board and investors.

Ciaran O’Donnell FCCA

06unwind your Balance Sheet

Your balance sheet is a list of who you owe, who owes you, what’s in the bank, equity, debt and other accounting adjustments. You can calculate your net funding position (in bold above) so long as your balance sheet is up to date. Remember, your latest balance

sheet is also the starting point of your next cashflow forecast.

Ciaran O’Donnell FCCA

07slick bookkeeping

Find yourself a bookkeeper (or accounting firm) who works with other start-ups in your sector, comes highly recommended, is flexible, works with cloud accounting

packages, can do ‘month end’ quickly and has the capacity to work with you for the next 12 months minimum.

Ciaran O’Donnell FCCA

08use Xero, not Sage

Use a cloud based accounting package which you and your bookkeeper can both access, upload invoices as PDFs,

integrate with your bank, export to excel in a clean manner (for analysis, reporting, variance analysis, Board packs), etc.

Ciaran O’Donnell FCCA

09update your bookkeeper

Keep your bookkeeper in the loop so he/she can account for things right first time. Don’t leave it to a late rush before Board Meetings or pitching for new investment. An email is

the perfect file note to keep your bookkeeper updated.

Ciaran O’Donnell FCCA

10no debit cards or cash

Do not use the business bank account like a personal one. So no micro transactions or cash withdrawals with a debit card. For out-of-pocket expenses complete an expense claim with

receipts attached. Or get a company credit card for small spend or web subscriptions. Better practice for you and your staff.

Ciaran O’Donnell FCCA

About meI have worked with 25+ start-ups and early stage businesses in four years. All face similar challenges starting out and all want a strong and robust finance function from the outset that can support their ambitions and growth. Most start ups don’t access the right financial support in their early stages.

If you want to know more please get in touch.

Ciaran O’Donnell FCCA+44 (0) 7782 329 245ciaran@virtualfd.mewww.virtualfd.mehttps://twitter.com/TheVirtualFD