118. Avoid These Startup Finance Mistakes — Insights from a Fractional CFO
Most early-stage founders know that building a product and finding customers are top priorities. But what about finance?
If you’re like many founders I work with, finance often feels like a “later” problem. But ignoring it too long can make fundraising harder—or even sink your company.
In a recent Feel the Boot episode, I sat down with Josh Aharonoff, a fractional CFO who works with fast-growing startups, to talk about what founders need to know about finance—and when to start caring about it.
Whether you’re pre-revenue, bootstrapping, or thinking about raising capital, here are some of Josh’s biggest takeaways to help you avoid common mistakes and get your financial house in order.
1. Don’t Overcomplicate Your Early Finance Setup
If you’re in the earliest stages, you don’t need a CFO—or even an accounting firm—right away. Josh recommends focusing on two basic things:
Track your cash balance. Know how much money you have and where it’s going.
Stay compliant. File taxes, stay up to date on sales tax (if applicable), and make sure you’re not ignoring state or federal filings.
You can handle this yourself, or with the help of a tax professional at year-end. You don’t need fancy software (though tools like QuickBooks can help if you want automation).
Bottom line: Early on, simple is good—just don’t let compliance slip.
2. Don’t Wait Too Long to Get Help
Josh points out that every founder hits an inflection point where the finance side becomes too much.
That moment usually comes when:
You’re growing fast and need better tracking and forecasts.
Investors start asking for real financials before committing money.
At that point, founders who try to “do it all” end up spending way too much time on bookkeeping instead of growing the business.
Josh’s advice? Hire a fractional bookkeeper or accounting firm before you need a full-time CFO. Save the CFO for later, like Series B or beyond, when strategic financial planning becomes essential.
3. Know the Difference Between Cash and Accrual Accounting
One big mistake Josh sees? Founders not understanding the difference between cash basis and accrual accounting—and when each applies.
Here’s the quick breakdown:
Cash basis: You count revenue and expenses when money changes hands.
Accrual basis: You recognize revenue when it’s earned and expenses when they’re incurred—regardless of when cash moves.
Early on, cash basis is fine—it’s simple and helps you keep track of cash flow. But as you grow (especially when raising money), investors expect accrual accounting.
👉 Pro tip: If you’re selling annual subscriptions (SaaS founders, I’m looking at you), deferred revenue becomes a key concept. You can’t recognize that full $12K contract as income on day one—it spreads over the year.
4. Sales Tax and Payroll: The Hidden Compliance Traps
Most founders know to file their federal taxes—but sales tax and payroll compliance trip up a lot of early companies.
Sales tax: If you’re selling products or software, sales tax rules vary by state, and many founders don’t realize when they’ve triggered Nexus (the threshold for collecting sales tax). Tools like TaxJar, Avalara, or Stripe Tax can help automate this.
Payroll: Even tax professionals outsource payroll because it’s complex. Don’t try to run it manually. Tools like Gusto, Rippling, or Justworks make it manageable.
Josh’s advice? Don’t wait until it’s a problem—set these systems up properly early on.
5. Investors Expect Clear Financials—Even Early On
If you’re thinking about raising capital, your investors will expect clean books and a clear financial model—even at the seed stage.
Josh recommends:
Basic financial statements: Profit & Loss (P&L), balance sheet, and cash flow statement.
A thoughtful financial model: Not just a “hockey stick” graph, but a bottom-up model showing how you plan to grow (e.g., sales reps hired, customer acquisition cost, churn rates).
You don’t need to get fancy, but you do need to show that you understand the numbers behind your business.
6. You Probably Don’t Need a CFO (Yet)
A CFO isn’t your first finance hire, despite what some founders think. CFOs are expensive, and you don’t need them handling payroll or vendor payments.
Instead, Josh recommends:
Start with a bookkeeper. Handle day-to-day finances and keep the books clean.
Use fractional experts as needed. Bring in a fractional CFO when you’re preparing for a raise or need strategic planning.
Eventually, hire a VP of Finance. This person can oversee finance as you scale—typically around Series A or C.
Key Takeaways for Founders
If you’re pre-seed or pre-revenue, here’s the quick version of what to do:
✅ Track cash and stay compliant.
✅ Use cash basis accounting until you need more.
✅ Outsource bookkeeping before you get buried in receipts.
✅ Watch out for sales tax and payroll compliance.
✅ Prepare basic financials and a real model if you’re raising money.
✅ Don’t overhire—start with what you need.
Want to Learn More?
If you want more great insights on how to set up your startup for success, connect with Josh Aharonoff on LinkedIn (@yourCFOguy) or visit Model Wiz, his tool for building forecasts and dashboards.
Also, check out my interview with John Li of PickFu, where we talk about how to test and validate startup ideas before you spend a dime.
Transcript
[00:00:00] Lance: Josh, welcome to feel the boot.
[00:00:02] Josh: Thanks Lance. Good to be here.
[00:00:04] Lance: So I really appreciate you joining us. Let's start off by having you maybe just give a, a brief introduction for who you are and what it is you do.
[00:00:12] Josh: Cool. So I am a fractional CFO for fast-growing companies through our company, mighty Digits. I also am the founder of a SaaS tool called Model Wiz.
It's an Excel plugin that allows you to do cool automations with dashboards and financial models. Lastly, I share finance and accounting insights every day to an audience of over 400,000 people.
[00:00:32] Lance: Fantastic. So a lot of the people who we are talking to who watch, feel the Boot are very early stage companies.
They typically don't have a lot of structure or process in place, particularly around finance. I think that most founders aren't thinking about the financial aspects of the business unless they're specifically FinTech founders. So. What kinds of things should an early stage company be making sure they put in place?
And when do those need to go in? You know, in particular, what do they need to be worried about if they're, for example, even pre-revenue at this point?
[00:01:10] Josh: Good question. So I, I like to think of a finance and accounting function in different stages. And of course everyone starts at stage one. Stage one to me, it's really just important that you're keeping track of your cash balance.
You're checking your bank periodically. You're making sure that nothing is going off the rails, but most importantly, you're staying compliant. So you're hiring a tax professional at year end that tax professional oftentimes, but just do your bookkeeping. Make sure that you guys are remaining compliant with your federal and state tax returns with any sales tax you may have with your Delaware franchise, tax lines and so forth.
It's up to you. In the early stages if you wanna get an accounting software, there are a lot of efficiencies and automations you can take advantage of. But again, when you're in the very early days, you really just need to make sure you're keeping track of your cash balance and you're staying compliant.
[00:01:59] Lance: Now, do people need to be worried about things like, you know, gap accounting or versus cash basis or things like that? You know, how, how far down do they need to be getting when they're trying to keep those books in a.
[00:02:11] Josh: So I'll just do a really quick overview of, for those who aren't aware of the difference between cash basis accounting and accrual basis accounting, which is in accordance with gap, generally accepted accounting principles.
Cash basis of accounting is really simple. It means you're just classifying transactions when they enter your bank account as deposits, as income when they leave your bank account as expenses. Under Accrual Accounting, you're actually focusing on whether you earn the income yet by delivering your product or service.
Whether you consume the expense yet. So most companies when they start off, they really just opt for the cash basis. 'cause it's super simple. You don't really have maybe too many outside investors who wanna see things differently, and that's totally fine. It'll save you a lot of time under the cash basis.
But generally, as a company matures, it's very common to transition to the accrual basis because outside investors like to understand what exactly is happening in the business. And eventually when you get to the point where hopefully you have an IPO and you're a public company, you don't actually have a choice, then you have to go under the accrual basis of accounting.
[00:03:12] Lance: Got it. And, and there's certainly a lot of complexities and so forth to that. I remember having to learn some of that. Personally, I, I like cash basis accounting in the very early days just because the company runs outta money on a cash basis. That's where the rubber meets the road. If you can't actually, you know, cover payroll and, and write checks for the services and subscriptions that you've got.
So what do you see as the most common mistakes that founders are making and and what kind of things do you find you need to help them kind of dig their way out of when they bring you in?
[00:03:44] Josh: So, typically founders get to a point, they have an infection point. Either their business is growing so quickly, which is a champagne problem that what worked in the early days doesn't now work in the later days.
Or they're about to raise capital, but their investors are saying, Hey, you're finance and accounting, your financial reporting, it's not really up to par. I don't feel comfortable giving you my money until you fix that. So I don't know if I would say that there are too many mistakes that happen before that point.
As long as the founders aren't spending a crazy amount of time in the finance and accounting function and are spending as much of their time as possible trying to find product market fit, and actually grow their company, when companies do hit that inflection point. A common mistake that I see is founders who initially have maybe an MBA, they maybe even have a finance and accounting background themself, and they're the ones who are handling it.
Eventually it gets to the point where a few hours a month turns into a few hours a week, maybe even a few hours a day. Although I definitely am biased and I think finance and accounting is super important. Again, I don't think that's where a founder should be spending their time. So I would suggest when you do hit that inflection point.
Hire a freelancer, hire an outside firm, do whatever you can. So you could focus on the more important picture for a founder, which is growing the company and the culture.
[00:04:59] Lance: So you mentioned that often this is driven by the investors looking for sort of that more robust kind of accounting or different kinds of accounting.
When do you tend to see that coming in? Uh, do you see that with, you know, early angels or is that more into the seed a, a round when there's, there's more kind of financial activity going on in the business.
[00:05:21] Josh: Series A. Almost definitely. You'll see investors become a lot more focused on the actual financials.
Ideally, they wanna see projections, they wanna understand what you're going to be doing with the cash. 'cause now we're talking about tens of million dollars that they're going to be investing. It's possible you'll be seeing that as well. I found, just from my experience, every investor, of course, could differ.
Every company and industry is different when you get to the seed point or anything prior to the seed point. It's really just about proving that you understand a lot about the market. Ideally, the founders have a really good track record as well, and there are early signs of traction. I feel that getting to the series A shows that you have product market fit and now it's time to really scale things.
[00:06:01] Lance: Yeah, it's, it's interesting. I found that there seem to be real geographic differences as well in terms of what people are looking for. So you've got the classic Silicon Valley investors who are all about the potential market size and. Current revenues and things like that just don't matter. But you look at, for example, New York tends to be a little more fiscally oriented and Europe even more so.
So depending on where you are and who you're talking to, the audience can vary quite a lot. So when people are starting to look at, at building this out, what should they be hiring first? I mean, probably they don't need a full-time CFO on day one, but what are the sort of the markers for when you should bring people in?
And what order do you think people need to do that?
[00:06:41] Josh: So generally. A CFO to me is not something that you need really until like earliest series B, and that's given the fact that CFOs are both super expensive as well as you don't want to have a CFO come in and do bank reconciliations or process payroll or manage payments with vendors.
So in the early days when you're starting to make your first hire, whether that's a full-time in-house hire, or whether it's a freelancer or that you're working with an accounting firm, you wanna think about. What are the things that you need assistance with and what is your budget? And generally what I see founders do is they make their very first hire as an admin, as a bookkeeper.
And again, in the very early stages, when the founders are the one who are doing it themself, that usually is the best route because that frees up the founder's time and it's not rocket science. So you have to know how to classify two transactions, especially if it's on the cash basis. There's not really much to it.
What then becomes tricky is as you then start to graduate. Your investors are starting to request more detailed information. You're no longer reporting. Maybe on the cash basis you wanna record on the accrual basis. It's not so common for a junior hire that may be a freelancer to ultimately be able to handle the full picture, build a robust financial model, and help you raise that capital.
So a lot of times, founders, although I may sound biased, turn to a fractional approach where they work with a company, they get a fractional bookkeeper, a fractional account accounting manager, a fractional CFO. For one rate without having to pay health benefits or payroll taxes. They can kind of get a little bit of everything.
I'm just gonna finish on this last point with that in-house hire, the most common in-house hire that they make is typically a VP of finance, and that's usually in between the series C, more likely the series A level and that VP of Finance will oversee the entire function and we'll most likely manage whatever resources are already in place.
[00:08:29] Lance: Yeah, I think that makes a lot of sense. I, I actually used a, a fractional CFO myself. It turned out to be really, really useful because you could reach out and touch them. For those strategic financial discussions that you needed to have and thinking about the, the high level aspects of what you're doing, but it was not day-to-day.
Right. We didn't need them all the time. We could just reach out, take advantage of that, and then save money the rest of the time by, yeah, just using the bookkeeper or whoever was doing that on a day-to-day basis to keep the company running For sure. So once you're starting to work with someone, say you've got a bookkeeper, what, what should you be asking for in terms of financial metrics to make sure that the company stays kind of on the straight and narrow and right side up.
[00:09:13] Josh: So I'll, I'll expand a little bit on financial metrics and just say, in general, what should you expect from a bookkeeper? Bookkeepers, for the most part, start off with the financial reporting, making sure that all of your transactions are classified. Once you classify those transactions, you then wanna reconcile them confirming they matched to your bank account, to your credit card statement.
And then if you're under the accrual basis, you may need to also book adjustments. Those adjustments can be, let's say, if you receive a cash deposit for a 12 month contract, booking it between revenue and deferred revenue, and other things like that. So just making sure that you have a well-oiled machine with your financial reporting.
For your sake to understand what's happening in the business, how much money you're spending, and then also for your investor's sake, the more capital you raise, the more reporting requirements you're gonna have. But in the early stages, you'll also want this bookkeeper to handle a lot of the administrative things related to a finance and accounting function.
So like we spoke about earlier, that can involve collecting bills from vendors, collecting approvals, processing payments, then on the due date and upon the approvals, invoicing, customers. Processing payroll from employees dealing with state tax issues, forwarding 'em to the right department and so forth.
That's how I think of a bookkeeper in the early stages of a company.
[00:10:22] Lance: So why don't we dig a little more into deferred revenue, because I think a lot of people are unfamiliar with that. I certainly was when I started, but it's something that, especially with SAS companies and the big move to subscriptions, really applies to almost all of the startups that I see.
[00:10:37] Josh: Sure. So going back to that difference between cash basis accounting and accrual basis accounting. Again, crash base of accounting. All it cares about is does you receive the money or did you pay a vendor? Yet when you receive it, it's income. When you pay it, it's an expense. The accrual base of accounting cares about when exactly the activity took place.
So with revenue, let's say you're selling access to your platform for a 12 month period. If you charge, let's say under round numbers $12,000 for the entire year, like we said, under the cash basis, you have $12,000 in revenue, 12,000 in income for that period. Under the accrual basis, you need to think about the actual life of your contract, and you can't just report all 12,000 of that income in the first month because you have another 11 months of access to your platform that you need to share with your customer.
If you were to close down tomorrow, you were to have a bug and all of a sudden your, you know, web servers weren't up and running, you'd have to return that money. So you in essence, record a thousand dollars each month. The balance goes to your balance sheet in an account called deferred revenue, which is a liability 'cause it's something that you, uh,
[00:11:43] Lance: got it.
Now, I think it's really important for people to wrap their heads around this when they're, when they're looking at these numbers, because it, it changes things radically when, when you are starting to take, take that into account, you know, you do a big contract in December, almost all of that ends up landing in next year.
If it's a, if it's an annual contract, exactly. So how should someone think about structuring this now before they hire that vp, when they're starting to bring in people? How do you organize that accounting function in a startup?
[00:12:14] Josh: So in the early stages, again, it's fine if a founder is hand will it themself.
If they have a quick grip on it, there's not really too much to it. And ideally it's less than, let's say five hours a month. As that starts to exceed a founder's time, you then want to hire some sort of fractional support, whether it's a bookkeeper, whether it's an accounting firm, so you can get those things off your plate, and so that you could actually do a lot of the things that you may not even be able to do correctly.
So in terms of structuring the entire finance and accounting function, again, just backing up and talking about the different areas. There's your financial reporting, there's your accounts payable, your invoicing, your payroll, and your taxes. So you just wanna have a mix of people who know what they're doing, who could take away the administrative burden of the founders actually doing it themself and keep you compliant.
[00:13:04] Lance: And so with compliance, what are the places where people typically get out of compliance? What's, where, where are the mistakes or the, the pitfalls that they're gonna run?
[00:13:13] Josh: So a lot of people, I, I think rather, I would say it the other way around, very few people. Forget about their actual federal and state taxes.
They recognize it's beyond their pay grade. They hire someone. So it's pretty rare that a company is not in compliance when it comes to that. What I see companies oftentimes be non in noncompliance with is sales tax. So the way sales tax works is if you're selling digital goods, digital or even physical goods, you need to charge an additional amount to your customers.
Then when you click that amount, you need to remit it to the government. So it's technically not an actual expense to the business, like an income tax would be, but that it's really just a pass through. You collect it from one person, you then pay it to another. But what a lot of founders don't realize is sales tax is incredibly complex.
All taxes, unfortunately, are incredibly complex and there are different rules for each state. And if you're international, it could also be, you know, they call it that, uh, VAT value added tax. In the US specifically, it's called Nexus. Whenever you actually cross a threshold for the requirements for now when you need to start collecting sales tax, and unfortunately, every state is different when it comes to sales tax, so you really need like a third party software tool.
You could hire a professional, but generally all of them use some sort of tool to keep track of the ever-changing rules for Nexus in each and every state.
[00:14:35] Lance: Are there any particular tools that, that you recommend to, to people especially you know, that, that are sort of scale appropriate for a small company?
[00:14:43] Josh: For sure. There are a few, so Avalara probably is one of the most popular solutions out there. There's also roc, then TaxJar, which is a service that Stripe offers because a lot of founders use Stripe. That's helpful to just have it already plugged in directly. Another tool is Paddle. I haven't used them, but I've heard good things from other people where.
They'll actually become an employer of record. So instead of you having to collect the tax and remit it on your own and register in each and every state, they'll just handle it all directly. Much like a professional employer organization will handle your health benefits and payroll taxes for payroll.
[00:15:19] Lance: Right, and, and payroll's another one of those things that I, I discovered was hugely complex. I remember back in the nineties when I was starting out, I was talking to my, my tax accountants about how to manage payroll and they go, oh, we outsourced that. And I figured when my tax accountants were saying they outsourced it, it was probably a good sign that, uh, maybe I should not be trying to handle that on my own
[00:15:39] Josh: for sure.
[00:15:41] Lance: So what changes as things scale when a company's going from, you know, pre-revenue to making a few thousands of dollars to now they're getting into, you know, they're doing a million to 10 million a RR. How does that change things?
[00:15:55] Josh: So two of the biggest things that change, again, going with the idea that you always wanna make sure the founders are not being bogged down by this type of work, but outside of that, the need for external reporting.
As well as internal reporting goes up exponentially, and it makes sense. If investors are pouring in tens of millions of dollars into your company, they're most likely taking a board seat. They want to confirm that that money is being wisely spent. They wanna understand what your projections look like.
Are you hitting those projections? If not, what's the reason for why you're not any investors nightmare if they invested a ton of capital and it just disappeared the next day. Similarly, founders themself need to understand what is happening financially in their business. They don't need to know the details behind a SE 6 0 6 and different gap requirements.
They just need to be able to understand where is their money going, are they growing, are they shrinking? When is their cash out date, and so forth. So for that reason, the number one tool that I think a company should invest in, especially as they surpass that series, seed level, is a financial model. It's in essence a combination of a forecast of where the future is going, where the company is going, which can be tweaked with a few levers as well as a historical readout of where the company has been.
That ideally blends really nicely from one to the other.
[00:17:12] Lance: So you, you provide some fractional CFO services, and we've talked a little bit about CFOs, but I, I think a lot of founders are not really familiar with what that role provides. So could you maybe talk a little bit about what should someone expect?
From A CFO, how do you work with someone like that, within the C-suite of the organization? Uh, and, and, you know, what, how do you make them as effective as possible?
[00:17:37] Josh: So, I'll first say that the term fractional, CFO, it's a pretty loose term, just like a CPA or an accountant can also be a fairly loose term.
The way that I think of a fractional CFO, this is someone who gets involved specifically in managing that financial model. Who gets involved in your investor and board of directors relationships to ensure that things are going smoothly, they're getting the information that they need, they're getting the story that they need, and so forth.
So one of the biggest areas that a fractional CFO will invest in is this financial reporting function. They may not be the ones who actually does the bookkeeping and the month end close, but ideally, they're very familiar with the process and ideally they have an accounting background so they understand double entry accounting.
Where a fractional CFO really shines is then creating that mechanism where the founders management, they could understand everything every single month that's happening in the business as it compares to their budget, as it compares to the prior years, to the prior period, what the next few months are going to look like the next year, and so forth.
One who could really manage that function as well as the investors and the board of directors.
[00:18:47] Lance: So as the CEO, the new founders, you know, bringing in a, a fractional, or maybe they've left it longer and they're bringing on a full-time CFO, what sort of question should they be asking that person, assuming that that new person is not sort of driving that conversation and offering things up?
[00:19:05] Josh: I think a lot of it has to do first with the type of company that you are and the industry that you're in. Some fractional CFOs excel at working with early stage startups. Others excel at working with non-for-profits, other with CPG companies, manufacturing companies. So really just gathering that industry experience I think could be a really good place to start.
And then understanding what type of projects has this fractional CFO been involved in? It may not be so common once you get to series B and series C to work with a fractional CFO. And when you get to series B and series C, oftentimes there's venture debt involved. There are all sort of liquidity optimization strategies involved.
It's good for a fractional CFO to have that experience. But again, I. Most of the time a company will bring that in in-house and maybe the fractional CFO is part of a larger firm where they're continuing to offer support at a lower level, like bookkeeping or other administrative stuff.
[00:19:59] Lance: So what do you think, how do, how does the finance function help with fundraising, especially at the sort of the pre-seed and seed levels?
[00:20:09] Josh: So investors are always gonna have a list as part of their due diligence. They're gonna wanna understand where has the company been in terms of their financial reporting. So that's gonna be a standard profit and loss. I. A balance sheet and a statement of cash flows. So just making sure that that part is dialed in is a huge value add for a fractional CFO.
And a lot of times, companies, again, especially if they're working with just a freelance bookkeeper who doesn't have a lot of experience outside of just the bookkeeping, they may not have their chart of accounts optimized. They may not be following accrual accounting. So just making sure that the financial reporting on what's actually happening is optimized.
That could be a really huge value add. Then taking it one step further, especially as you get past series seed, again, investors are gonna wanna understand what is your vision for the future? If I'm gonna be giving you $20 million, where's this money going? Why do you need this money? Are you investing in r and d?
Are you investing in sales and marketing? Show me the blueprint. And you don't necessarily need to convince them that this blueprint is exactly what is going to happen. But you do need to convince them that you thought about it. You understand the industry, the market that you're in. You understand what it takes to scale this company.
'cause if you don't have that blueprint, odds are you're probably not going to get there.
[00:21:20] Lance: Now, I see a lot of founders sort of hit a brick wall when they're trying to put together a financial model and financial forecasts. Particularly when they're pre-revenue, they haven't actually sold anything yet, and they're trying to put together five year projections to give to the investors and to, you know, have that nice hockey stick graph in their, uh, presentation deck.
What's your suggestion? How do you help founders kind of think through that process and, and what's your approach to building those models?
[00:21:50] Josh: So to a finance and accounting function, having different stages. I like to think of a forecast also having different stages. Typically when you're at the series seed level, you're building a stage one or a level one forecast, which really is just a basic revenue build, and ideally with that revenue build, you're showcasing how inputs result in outputs.
You're not just saying, okay, I think I'm gonna do a million in sales this year, 5 million next year, or, Hey, the entire market's worth 10 billion. So if I just take a fraction of a percentage, that'll be $10 million next year. We're all guilty of doing that at some point, but that's not really a defensive way, defensible way to build a revenue forecast.
Ideally, you showcase an investment in paid ads, an investment in sales reps with a ramp, period with a quota. That's what ultimately leads to us having revenue. As you graduate from a level one forecast, you then attach a p and l. So you may showcase, for instance, your headcount, which is gonna be your largest expense, which again, when you get to the Series eight level investors don't wanna know only how you're gonna grow the company, but how you're gonna actually use their cash, how you're gonna stay ultimately above the level where you won't have to raise capital in another six months or so.
A level three forecast is one that I like to think includes a balance sheet and a cash flows, which is all dynamic. Now, any changes to your income statement and balance sheet can automatically showcase. In your cash flows using the indirect method. And then finally, a level four forecast includes all of that in addition to all of your historicals matching to your accounting software, along with beautiful dashboards where the founders and investors can get really quick insights into all the information that you need to share.
[00:23:27] Lance: So do you have any sort of favorite tips or, or advice that you give to founders that you're working with sort of most often? What's, what's the number one or top couple of things that come up?
[00:23:38] Josh: So when I build a financial model, I like to do it in this order. First and foremost is your revenue build of the hundreds of financial models and forecasts that I built in my career.
I've never had a company with the exact same revenue build and business model, as in others. Everyone's a little bit different. It's like snowflakes to me. So that's generally where the bulk of the time that I'll spend with a founder when I first start working with them. And that's a really good value add.
'cause again, this is your business model. This is what drives everything. The next biggest area that I'll spend when I work with a founder is their existing headcount as well as their projected headcount, because again, that's gonna be the largest expense, nine, nine and a half times outta 10. Making sure that you have really accurate calculations in there, not just for what the salary's gonna be, but also the payroll taxes, the health benefits, and not just using a a smooth number, but if someone starts in the middle of the month, if they get terminated in the middle of the month, you gotta prorate that.
Getting your head count accurate is a huge piece of just managing your actual cash burn. The other two areas that I'd like to then focus on is just forecasting the rest of your profit and loss, which oftentimes involves a driver similar to like a six month average or maybe a. The amount from a prior year with a buffer of some sort.
There really are just a multitude of different ways you could tackle it. And then lastly, your balance sheet. How will you forecast out each area of your balance sheet, your inventory, your accounts receivable, your accounts payable, your CapEx, and so forth? Once all four of those are done, you then have a robust financial model.
[00:25:02] Lance: And I always like to see that. 'cause when I look at the models for early stage companies, I mean, my first assumption is they're wrong. Because it's very, you know, startups are so wildly divergent in terms of what happens and reacting, but it tells me a lot about how they think about the company and what measures they've done.
You know, it, it's always kind of disturbing when I see someone has plugged in, uh, you know, 20% monthly growth and it's just a fixed number in their chart that, you know, revenue's going up by 20%. It's like, why, what, making it more of a bottom up approach so that you can support that. If I ask you a question, you've got a better answer than that.
Seemed reasonable. Exactly. So is there anything that you'd like to promote or talk about? Where, where can people find you?
[00:25:46] Josh: Sure. Well, a few things. Uh, first you could find me on pretty much any social media channel, your CFO guy. LinkedIn is where I have my biggest audience, over 400,000 people. I have a daily newsletter as well where I share finance and accounting tips that just crossed a hundred thousand subscribers.
I'm also actively working on promoting and building up our YouTube channel, which has been a really fun experience. And again, I have the X Profile, Instagram, pretty much everything out there. So that's my social presence. If you need a fractional CFO or you just need advice for your startup in any sort of a way as it relates to finance and accounting, you could reach out to me at josh@mightydig.com.
And then lastly, like I was mentioning earlier, I actually have an Excel plugin that will connect to your accounting software and build a forecast. Connected directly to your data sharing a bunch of really beautiful dashboards that's called Model Wiz. We just released a free tier last week and we had over 700 signups, so you could check us out@modelwiz.com.
[00:26:40] Lance: Fantastic. I think those will be great resources. I really appreciate your sharing your experience and insights. I think this will be super useful to most of the founders out there, and I appreciate you sharing your time with us. Thanks, Lance. Great to be here.
