Getting Books Investor‑Ready Before the Term Sheet
The Challenge
Like most early-stage companies, this client ran its books on a cash basis. Revenue was recorded when the invoice was paid, expenses when the bill cleared.
Then the company closed a seed round and started building toward Series A. Deferred revenue from annual contracts wasn’t tracked. Prepaid expenses hit the P&L in full the month they were paid, distorting margins. Payroll accruals at month-end were inconsistent.
What We Did
We started with a scoping review to determine what a proper conversion required at this company’s size and complexity. We built an opening accrual balance sheet, reconstructing accounts receivable, accounts payable, deferred revenue, and prepaid expense schedules from the underlying contracts and vendor agreements. We defined a revenue recognition policy under ASC 606 that matched how the company delivered value to customers.
We then kicked off a month-end close process with a close checklist, accrual journal entries and a reporting package the board and investors could rely on every month going forward.
The Results
The client’s financials were fully converted to GAAP accrual basis and reconciled to the opening balance sheet, with all twelve months of prior financials restated and available for investor review. The books held up seamlessly through Series A financial diligence.
Why It Worked
Cash-basis books are not the standard that investors, auditors, and boards expect. The gap between “our bookkeeper closes the books” and “our financials will hold up under diligence” is exactly where raises stall or valuations take a hit.
Series K Financial closes that gap before it costs you a term sheet. We don’t just convert your books once. We build the close process and we keep running that close process every month, so your books stay diligence ready long after the round closes.
Will your books hold up under diligence?
Contact Series K Financial for a complimentary financial readiness assessment. We’ll review where your books stand today and what it would take to get them investor-ready.