In working with 100+ companies since inception, here are the top 3 things I see missing in their financial operations when we take over...
Related: See this post on LinkedIn
1) "Catch-all" accounts on the income statement: The chart of accounts is the first place to split out expenses into relevant detail to show the CEO where the money has gone in the past...and see what is or isn't working. Example: Rather than a catch-all "Marketing expense" line, we split out PPC Advertising, Agencies, Conference Sponsorships, Referral Fees, Marketing Software, etc. This helps calculate Customer Acquisition Costs (CAC) and in many cases, reveals costs that nobody knew they were still paying for (like 30 day software trials that quietly auto convert into paid subscriptions).
2) CAPEX vs maintenance costs: Startups companies spend a lot, if not most, of their early capital on developing products. And established companies invest in new projects to generate more income. We split out R&D and CAPEX (building products and capacity) vs maintenance costs (fixing and incrementally improving) to help CEOs see what they're spending on building vs maintaining their products.
3) Three Statement Forecasts: A three statement (PL, BS, CF) forecast with various assumption toggles is a clear way to model out the business in base case, downside, and upside cases. Not only can you track to the long range plan (breakeven or EBITDA target), but you can also track your cash balance on a monthly basis to forecast out when you need to start raising more money or reducing costs.
Here are a few companies we've helped: https://pinewoodfs.com/case-studies
