Startup Finance Ops
Operational finance for survival: keep books clean enough to make decisions, protect cash, and avoid “unit economics but no runway” failure.
This is not accounting or tax advice. Use it to build a finance cadence and to work effectively with professionals.
When to Use
- You need a basic finance operating system (solo founder or early team)
- Cash runway, burn, burn multiple, and forecasting for the next 13 weeks
- Billing and collections process (invoices, payment terms, follow-ups)
- Monthly close cadence and a minimal KPI pack
- Translating pricing/packaging into billing mechanics and cash impact
- Compliance awareness: entity setup, tax obligations, VAT/sales tax triggers
- Bookkeeping setup: accrual vs cash, reconciliation, chart of accounts
- Finance readiness for fundraising or audit prep
When NOT to Use
- Detailed tax strategy or jurisdiction-specific filings -> project-qtax (UK only)
- Pricing and unit economics modeling -> startup-business-models
- Full accounting or audit services (hire a professional)
Quick Start (Inputs)
- Business model: subscription, usage-based, services, hybrid
- Billing method: card, invoice, ACH/wire; payment terms
- Current tooling: bank, invoicing, bookkeeping (or none)
- Revenue and expense structure: top 5 categories, major vendors, payroll/contractors
- Current runway and any upcoming commitments
Workflow
- Set up a minimal finance stack
- Bank account separation (business vs personal).
- Invoicing + payment collection workflow (even if manual).
- Bookkeeping tool/process (or outsourced).
- Define a simple chart of accounts (CoA)
- Keep categories stable so month-over-month comparisons work.
- Separate COGS vs operating expenses.
- Install billing and collections SOP
- Use
assets/billing-and-collections-sop.md. - Decide what “past due” means and what happens at 7/14/30 days.
- Build a 13-week cash forecast (survival view)
- Use
assets/13-week-cash-forecast.md. - Update weekly with actuals and adjust decisions (hiring, spend, commitments).
- Run a monthly close (lightweight)
- Use
assets/month-end-close-checklist.md. - Goal: numbers are directionally correct and consistent, not perfect.
- Produce a minimal KPI pack
- Use
assets/finance-kpi-pack.md. - Tie decisions to cash: new spend must have a hypothesis and a stop rule.
Unit Economics vs Cash (Critical)
Unit economics answers "is this a good business if it scales?" Cash answers "do we survive long enough to find out?"
Common mismatch:
- Great gross margin but slow collections (AR) and high upfront costs
- Healthy LTV:CAC assumptions with no proof of payback time
- Usage-based revenue with variable compute costs that spike before pricing catches up
Compliance Awareness (Not Tax Advice)
You are not an accountant. But you need to know enough to avoid expensive surprises and work effectively with professionals.
Entity type -> tax obligations (get jurisdiction-specific advice):
| Entity | Typical Tax Obligations | Watch For |
|---|---|---|
| Sole trader / sole prop | Personal income tax on all profit | Unlimited liability; no separation |
| LLC / LLP | Pass-through or elect corp tax | State/country variations; self-employment tax |
| Ltd (UK) / GmbH / SAS | Corporation tax + director obligations | Payroll for directors; annual filings |
| C-Corp (US) | Corporate tax + payroll | Double taxation; 83(b) elections for founders |
VAT / sales tax triggers (check before first revenue):
- Domestic revenue threshold (e.g., UK: GBP 90k; EU: varies by country; US: economic nexus by state)
- Cross-border digital services (EU: OSS/IOSS; US: state nexus rules)
- B2B reverse charge rules (know when you charge VAT vs buyer self-assesses)
Payroll tax basics (triggered when you hire):
- Contractor vs employee classification (misclassification = penalties)
- Employer tax obligations (NI, FICA, or equivalent)
- Equity/option tax events (exercise, vesting, sale)
When to hire an accountant (triggers, not timeline):
- First revenue or first employee (whichever comes first)
- Cross-border sales or customers in multiple tax jurisdictions
- Fundraising (investors expect clean books and a cap table)
- Annual filings deadline approaching with no process
Red flags — stop and get professional help:
- Mixing personal and business funds with no separation
- Revenue in multiple countries with no tax registration
- Equity grants with no tax advice to recipients
- Payroll without proper withholding setup
For deeper entity comparisons and jurisdiction checklists, see references/compliance-awareness.md.
Bookkeeping Fundamentals
Accrual vs cash basis — choose early, stay consistent:
- Cash basis: record when money moves. Simpler. Fine for early-stage, most small businesses.
- Accrual basis: record when earned/incurred. Required for GAAP/IFRS, needed for fundraising at Series A+.
- Switch trigger: when investors or auditors require accrual, or annual revenue exceeds local threshold.
Reconciliation cadence:
- Weekly: bank account reconciliation (15 min — catch errors early)
- Monthly: credit cards, payroll, subscriptions, AR/AP
- Quarterly: review chart of accounts, clean up miscategorized transactions
Common founder bookkeeping mistakes:
| Mistake | Consequence | Fix |
|---|---|---|
| No separate business bank account | Audit nightmare; pierces LLC veil | Open a business account before first transaction |
| Categorizing everything as "general expense" | Useless P&L; bad tax deductions | Use 10-15 categories max, be consistent |
| Ignoring accounts receivable aging | Cash surprises; bad forecasting | Track AR weekly with follow-up SOP |
| No receipt/invoice storage | Failed audits; lost deductions | Use a tool (Dext, Hubdoc) or a folder per month |
| Delaying bookkeeping until tax time | Months of catch-up; errors compound | Close books monthly, even if rough |
Finance readiness checklist (fundraising / audit / hiring finance): see assets/finance-readiness-checklist.md.
Anti-Patterns (What NOT to Do)
| Anti-Pattern | Why It Fails | Better Approach |
|---|---|---|
| Forecasting uncommitted pipeline as revenue | Overstates cash position; surprises when deals slip | Only count signed contracts or card-on-file |
| Single-scenario forecasting | Blind to downside risk | Always maintain base/optimistic/pessimistic |
| Monthly-only cash review | Too slow to catch problems | Weekly 13-week forecast update |
| Ignoring AR timing | Invoice sent ≠ cash received | Track days-to-collection separately |
| "We'll fundraise before we run out" | Markets change; diligence takes longer | Start fundraising at 6-9 months runway |
| Gross margin confusion | Excluding variable costs inflates margins | Include all COGS (compute, payments, support) |
| No tax registration before first invoice | Penalties, back-taxes, lost deductions | Register entity and tax IDs before revenue |
| Skipping VAT registration past threshold | Retroactive VAT liability on past sales | Monitor revenue against domestic threshold monthly |
| Founder salary = "I'll just take what's left" | No payroll tax compliance; messy books | Set a modest salary, run proper payroll |
Resources
| Resource | Purpose |
|---|---|
| bookkeeping-stack.md | Minimal tooling and roles |
| cash-and-saas-metrics.md | Runway, burn, burn multiple, and KPI definitions |
| pricing-to-billing.md | Turning pricing into invoices, terms, and cash impact |
| compliance-awareness.md | Entity comparison, jurisdiction checklist, when-to-hire decision tree |
| financial-modeling-basics.md | 3-statement model, revenue/expense modeling, scenario analysis, model hygiene |
| fundraising-finance-readiness.md | Finance diligence prep, data room, GAAP readiness, accrual conversion |
| ar-collections-management.md | AR aging, collections workflow, DSO benchmarks, dunning sequences |
| budget-planning-allocation.md | Budget frameworks, stage benchmarks, scenario budgeting, governance |
Templates
| Template | Purpose |
|---|---|
| billing-and-collections-sop.md | Billing, follow-ups, escalation |
| 13-week-cash-forecast.md | Weekly cash forecast |
| month-end-close-checklist.md | Close cadence |
| finance-kpi-pack.md | Minimal KPI pack |
| finance-readiness-checklist.md | Fundraising / audit / hire-finance readiness |
Data
| File | Purpose |
|---|---|
| sources.json | Finance ops references |
What Good Looks Like
- You can answer “how many weeks of runway” from a single sheet that is updated weekly.
- Every invoice has an owner and a follow-up schedule; AR is not a surprise.
- You review burn and burn multiple monthly and make decisions (cut, pause, double down).