What kind of financial reporting or budgeting should I have in place?

Oliver Hutaff / November, 2017

Description

Oliver Hutaff, CFO/COO at Electric Imp explains key reporting and budgeting to have in place when starting to build your business.

Video Transcript

What kind of financial reporting or budgeting should I have in place?

I think too often when people go out and look to raise money they show their P&L and things are going to grow and being great three years out. I think, particularly for early-stage companies. You have to have a P&L in terms of setting expectations and just tracking your success. But for early-stage companies a P&L is a lagging indicator and so, in terms of the relevant reporting what a startup company should be tracking, you really have to start looking at leading indicators.

So how many customers do we have, how many engagements do we have, what’s the potential unit volume if we’re in that business, what’s the customer account if we’re in a different business model. I think in terms of thinking about your financial metrics. Cash is obviously king, and so you have to always be acutely aware of where you are from a cash standpoint, how much you’ve been burning up to that point and what your expected future burn is as well.

Too often I see people who say “well, we’ve been burning $500,000 a month for the last year and so that’s going to continue when they have aggressive hiring plan, or have aggressive marketing plans” and so they don’t think about what it’s going to look like going forward, they are sort of looking backwards.

A competent CEO at a startup, you have to always be looking forward, particularly around cash, as you start to get customer engagement, as you start to be better known, as you start to get later stage. I think then you transition into really measuring the business off of financial results, off of an income statement or balance sheet. I think that early on it’s really going to be about cash flow forecasting and making sure you have very very good visibility in terms of how your cash has been managed and spent.

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