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You have the Money - Now What?
This document provides an overview of finance and accounting best practices for startups that have received funding. It discusses establishing systems and processes for tracking money flow, communicating financial information to investors, and planning budgets and cash forecasts. The presenters have extensive experience and will help founders understand new responsibilities, outline best practices, and prepare to answer investors' key questions about how funding is being used, when the money will run out, and how the business is performing.
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You have the Money - Now What?
- 1. You Have theMoney - Now What? Finance & Accounting for Startups Post Investment
- 2. Fundraising is hard.You don’t have to do it alone. Designed for entrepreneurs, by investors, The Capital Network (TCN) is a non-profit that provides workshops, events, mentorship, office hours and a network to support you, the founder. Let TCN guide you through the fundraising process. Your future investors will thank you. TheCapitalNetwork.org @TCNupdat
- 3. Your Guides Jason Pulsifer GlobalFinancial Controller, MassChallenge 18 years experience in startup finance/accounting @jasonpulsifer13 jason@masschallenge.org Cecilia Frerotte Principal, Wolf & Company, P.C. 14 years experience in accounting/auditing @bostoncpafirm cfrerotte@wolfandco.com
- 4. Agenda 1. To helpyou understand your new responsibilities 1. To outline some finance/accounting best practices 1. To help you communicate with your investors Objective Introductions Processes, Systems and People Exercise Investor Questions Budget Overview Q&A
- 5. You’ve raised yourSeed • Putting your pitch into action • New responsibilities • Board interactions Systems People Process
- 6. Uses of CashHow does it happen? Who is responsible System/Technology Employees/Rent/Equipment Payroll/Check/Credit Card You/Partner/Employee/Contractor ADP/Expensify/Online Bill Pay Outgoing Cash
- 7. Sources of CashHow does it happen? Who is responsible System/Technology SaaS company sells software subscriptions Customers order directly from website using credit card You/Partner/Employee/Contractor Paypal/Stripe/Etc Incoming Cash
- 8. Process Best Practice: Automateprocess workflow, Document Internal Controls Order to Cash Accounts Payable Payroll Employee Expenses Reporting
- 9. Questions Every InvestorWants to Know: 1. What are you doing with the money? 2. When are you going to run out of money? 3. How is the business performing?
- 10. 1. What areyou doing with the money? Financial Reporting • Income Statement, Balance Sheet, Statement of Cash flow Standard Financial Reporting • Period Income Statement compared to budget with variancesComparison to Budget
- 11. Financial Results -Income Statement
- 12. Financial Results -Cash Flow
- 13. Financial Results -Balance Sheet
- 14. 2. When areyou going to run out of money? Cash Forecast Impact of actual results on future consideration Update Burn Rate Monthly Project “fume date” Better to raise money when you don’t need it
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- 16. 3. How isthe business performing? Key Performance Indicators & Growth Metrics Agreed upon between Investor and Exec Team prior to funding SaaS Metrics • Lifetime Value • Customer Acquisition Cost • Monthly Recurring Revenue • Net MRR Churn • New Bookings • New Users by Channel Other KPIs • Monthly Active User Growth • Net Promoter Score • Average Order Size • Unique vs Returning Visitors • Cost per Lead • Conversion Rate
- 17. Taxes Compliance Choice of Entity • CCorp vs Pass-thru • Fit for future plans? Federal Filing Requirements • Don’t buy into the myth! State Tax Issues • Nexus • Implications? Operating Losses • What are they? Contractors • Contractor vs Employee • Form 1099
- 18. Audits Compliance Investor Requirement • Audit historyvalidates results • Required in an exit, additional financing round • Facilitates due diligence Internal Controls • Segregation of duties • Custody • Authorization • Recordkeeping • Document Retention Common Issues • GAAP ≠ logic • Revenue recognition • Equity & debt transactions • Non-cash transactions
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- 20. Important Terms &Definitions Income Statement/Profit & Loss/P&L: Revenue – Expenses = Net Profit/(Loss) Balance Sheet: Assets = Liabilities + Equity Statement of Cash Flow: Sources/Uses of Cash – Operating, Financing, Investing GAAP: Generally Accepted Accounting Principles, rules & standards for financial reporting Audit: Independent verification of a company’s financial records Internal Controls: Set of policies, procedures, activities designed to maintain integrity & reduce risk Compliance: Ability to acct in accordance with GAAP, Federal, State, Etc Regulations Fiduciary: Obligation to act in the best interest of another Finance: management of money; plan-forecast-budget (what’s going to happen) Accounting: process of summarizing & reporting financial transactions (what’s happened) Key Performance Indicators (KPI): Financial/non-financial metrics used to measure progress Garbage In – Garbage Out: Sloppy accounting means sloppy results Due Diligence: Analysis & confirmation of facts, data, etc. prior to investment or sale Budget/Forecast/Projection: Forward looking financial plans – almost always excel Bookkeeping: process of recording transactions in accounting (what’s happening now)
- 21. People Infrastructure Requirements Best Practice:Part-time or Full-time? Depends on size, complexity and stage of the business Title Role Part-time rate Full-time rate CFO Overall Company Financial Strategy > $200/hour >$200k/year Controller Accounting Oversight & Reporting ~ $150/hour $120k- $180k/year VP Finance Finance Oversight & Treasury ~ $150/hour $120k- $180k/year Finance Director Business Performance Analysis ~ $150/hour $120k- $180k/year Accounting Manager Month End Close ~ $100/hour $90k-$120k/year Accounting Staff Transaction Processing (ie. Payables & Receivables) $50-$75/hour $50k - $80k/year Bookkeeper Data Entry $25-$50/hour $40k-$60k/year
- 22. Systems Infrastructure Requirements Best Practice:Integrate systems to automate process General Ledger AP/AR Payroll CRM Cap Table Payment Employee Expenses Reporting/ Dashboard s QuickBook s Bill.com ADP Salesforce eShares Stripe Concur Domo Xero Freshbooks Connect Pay Hubspot Capshare Square Expensify Grow Netsuite Mineral Tree Gusto Zoho Shoobx Paypal Nexonia Visible.vc Intacct Paysimple Paychex Pipedrive Captable .io Braintree Tallie Tableau Botkeeper