Curt Mastio
By Curt Mastio on October 11, 2021

Accounting Operational Maturity Roadmap – From Launch to Series A and Beyond

Building a successful startup requires grit and determination. Many fledgling enterprises don’t make it for various reasons, the most common being that they do not have a strong accounting run out of cash. But, many well-funded companies don’t make it either.

Launching a successful company is a challenging endeavor that can bring massive rewards and personal growth, no matter the outcome.

To be successful, the internal capability of the startup must be in line with the expectation of the market. As your startup grows, you’ll need different accounting tools and personnel at different stages. Companies in the launch phase can (and should) take a much more fundamental approach than a company with VC funding.

But knowing what you need to know and when can be a chore in itself. That’s why we’ve created this comprehensive guide for what your startup needs for financial and operational maturity at each of the first three startup stages:

  • Launch
  • Seed
  • Series A and beyond


The initial stage of a company’s journey, the pre-investment phase, is where companies test for traction, build an MVP, and bootstrap to achieve financial and operational success. 

It’s the most sensitive time for any startup. Applying the right resources at the right place is a critical aspect of setting yourself up for success.

Operational action items in the launch phase

Separate business and personal banking

Although it may not feel like it on a personal level, you and your business are separate entities.

The business’s expenses and cash flow must stay separated from your personal expenses and cash flow.  Opening a new bank account for the business can help efficiently manage and track business cash flow. When personal and business funds become intermixed, you can lose the protection of your legal entity, and create massive complications in reporting for taxes. 

Establish a basic accounting system

The establishment of a basic accounting system starts with setting a chart of accounts (COA). 

Depending on your sector, business model, and your legal entity structure, different businesses may use different COAs. For instance, an eCommerce store selling a few products likely has a different structure from a manufacturing company.

Establish a basic payroll system

Building a team also requires assessing the need for employees or independent contractors. This decision impacts tax withholding, payment of income taxes, payment of social security, unemployment taxes, etc.

A payroll system also helps you manage your compensation policy, decide payment terms and legal record-keeping requirements.

Ensuring compliance with legal and regulatory responsibilities can be much easier with an effective payroll system. For instance, making sure you’re compliant with your withholding requirements and paying all applicable company payroll taxes can be tricky.  Most modern payroll solutions can help automate these processes.

Year-end Tax Compliance

The business needs to comply with local and federal regulations, including:

  • Sales tax provisions on the products/services they sell in a specific state
  • Employment and payroll taxes
  • Tax on gross receipts (applicable in certain states)
  • Corporations taxes and filing requirements
  • Property tax on the real estate assets owned by the business

Compliance matters need to be taken seriously. Otherwise, you may face financial (or even legal) penalties.

Issue stock/membership units to founders

Sometimes, the allocation of stocks to the founders can be a challenging task. Assessing the future valuation of the startup and each member’s contribution can be complicated. 

Usually, stocks are taxable at the time of receipt or vesting. However, 83(b) election is a provision of the Internal Revenue Code (IRC) that enables startup founders to pay tax on the value of the stock at the time of stock granting rather than vesting.  The 83(b) election is crucial to file within 30 days of the stock grant because the IRS offers no late relief if you miss this.

Establish corporate bylaws or LLC operating agreement

While it’s tough to predict the future, structuring your company correctly in the early stages can save loads of hassle in the long run. 

Bylaws are the rules that help to understand how a company will perform its operations. These bylaws document the standards the company intends to follow and the details regarding:

  • the board of directors, 
  • the purpose of company formation, 
  • management structure, 
  • shareholders and board meetings, 
  • the rules for contracts and loan approval

If you’re organized as a Limited Liability Company, the documents look a little different.  Instead of bylaws LLCs have operating agreements.  In addition, LLCs distribute membership units to owners, not stock

Tech stack

Select an appropriate accounting software

Startups in the launch phase rarely have significant revenue. Basic online platforms like QuickBooks and Xero should fulfill the business’s needs regarding source documents and expense tracking management.

These tools are typically cloud-based, enabling access to data from anywhere in the world with just a few clicks.

Consider human resource and payroll management software

Gusto can be an excellent software for managing your payroll and human resources. Use it to manage different aspects of HR like recruitment, hiring, onboarding, time tracking, health insurance administration, paid time off. The most important aspect is access to a certified HR professional who can assist in any HR-related issues you might face during resource management.

The software is easy to use and available in multiple plans. Further, you can opt to use only payroll management or access the complete HR module along with payroll.

Standard business checking account

A bank account helps to simplify money management. Banks with a national presence (including SVB, Chase, Bank of America, Wells Fargo, and US bank, etc.) can make both your and your customers’ lives easier.  In addition, newer startup specific banks like and Mercury Bank are also great options.

Accounting resources needed in the launch phase

Generally, the accounting needs of a startup in the launch phase aren’t exceedingly complex or technical. The accounting function has two main tasks: record-keeping for the expenses and timely tax filing. 

Generally, a part-time bookkeeper can perform your essential record-keeping. But because there are often tax advantages available to startups for startup costs and carry-forward losses, hiring a certified public accountant is recommended to avoid critical errors and minimize your long-term tax burden.

Technical accounting consideration during the launch phase

Typically using cash-based accounting in the startup phase of business is recommended. It’s easier to follow and enables easy tracking of paid expenses. It also helps you with filing tax returns.

However, once your business grows, you need to shift your accounting to an accrual method.

Seed Stage

Seed stage companies have started to gain traction and are either generating revenue or interest from investors due to an attractive Minimum Viable Product (MVP). This is when a startup needs feedback from initial customers to improve the product design or features of the services. 

But a company at this stage has different accounting needs than during the launch phase.

Operational action items in the seed stage

Prepare a financial model for potential investors

Once the business idea takes hold, investors can be critical for business growth and development. A robust financial model can showcase the business’s current health, persuade investors to invest in your company, and calculate the worth of the business.

Ensure you set up your financial model so that the final results reflect any changes, even to one driver. 

Monthly financial statements and budgetary analysis

Month-to-month performance evaluations can be one of the best strategies to assess the business’s current performance. It helps to understand the cash flow of the company, analyze profitability structure, and drive necessary operational and strategic changes.

Optimize accounting processes

It’s also time to strengthen your internal controls and introduce accounting best practices, including integrating accounting processes across all business functions to maximize efficiency and drive enhanced flexibility.

Because your business is constantly evolving, you need to ensure your processes are appropriately adapting and monitored for risk and control. 

Let’s discuss two vital processes related to cash flow movement.

Set up an Accounts Payable (A/P) system

The accounts payable system needs to include strong internal controls. Otherwise, it may lead to late payments to the suppliers, fraudulent payments, double paying for the same invoice, and many more risks.

There is a need to incorporate strong internal control on the recording and payment side of the invoices. Controls for the A/P system include but are not limited to:

  • Invoice approval 
  • Purchase order approval 
  • Three-way matching approach (PO, invoice, goods receipt), 
  • Check for the duplicate payments, 
  • Proper invoice numbering 
  • Segregation of duties
  • Safe storage of the checks

Further, weak A/P controls and early payments may increase your working capital management needs. On the other hand, missed payment deadlines increase your risk of reputational loss and a cut in the supply of the business, which can also be disastrous.

Set up Accounts Receivable (A/R) system

Accounts receivable (A/R) management is a key aspect of effective business management. It’s because the availability of cash is a lifeline for business operations. Startups often fail not because of profitability issues but through poor cash flow management.  Startups in this stage need to make sure they have a scalable invoicing and collections process implemented.  Failure to do so could create cash flow headaches.

Implement an inventory management system (if applicable)

If your business model is inventory intensive, inventory management software is critical.  This software helps to track every aspect of the stock, from production to sale. Good inventory management tools effectively purchase, receive, track, and reorder to maintain ideal stock levels.

Once your company has more complex inventory needs, you can also consider implementing RFID – Radio Frequency Identification tagging for locating and tracking each inventory item, reducing chances of fraud and human error.

Develop basic month-end close processes

A monthly closing process complete with preventative controls related to recording and review is critical for proper financial reporting. For instance, there is a need to review if closing adjustments like depreciation, impairment, bank reconciliation, petty cash, and updates for the receivable and payable have been made.

Further, certain startup costs are incurred before the business starts to generate revenue that can be capitalized in the balance sheet and then amortized. However, certain expenses are not eligible for capitalization, including the cost of issuing stocks, real estate taxes, and the cost of partnership formation, etc.

It’s also important to note that if the startup’s founder pays startup expenses, these can be classified under short-term debt and need to be settled once the business starts to generate revenue.   

Tech stack

Financial modeling

Excel and Jirav are two software tools used for efficient financial modeling (You can find a financial modeling template here, from Founder’s CPA here). 

You’ll need Excel to develop a financial model that helps to perform financial analysis and produce a forecasted financial statement that helps investors assess the business’s potential. There are several functions in Excel that help to understand insights about the company’s financial health explicitly.

Jirav is used for driver-based financial modeling. It can be used to build growth plans, drive financial excellence, measure performance, financial planning & analysis, and provides comprehensive insights for cash management.

The greatest benefit of Jirav is that functions are interlinked, which leads to more accuracy and less time involved in developing your financial models.

Accounts payable management

Well-known A/P management systems include, Veem, and Melio. Veem is a global payment network beneficial to businesses importing goods/services from outside the US. Veem can be an effective payment solution because it operates in around 100 countries and provides services in 70 different currencies. can manage the bills, including tracking and ensuring an efficient payment management system. 

Accounts receivable management

Various accounting software offer functions for A/R management, including Stripe, Chargify, and Recurly. 

Stripe is a fully integrated suite of payment products designed to receive payment from all over the globe.

Similarly, Chargify and Recurly are excellent tools for businesses earning recurring revenue from their customers.  

Cap table

We recommend using Carta to maintain a record of granted stock options and maintain stock-related information accurately for effective management of your cap table. Mistakes at this stage can be extremely costly because of the complexity of matters related to regulatory provisions and compliance.

Further, Carta can produce a real-time cap table with built-in checks related to rule 701, rule 1144, and ISO $100k limit, making it easier for you to manage your equity efficiently.

Accounting Resources Needed:

Staff Accountant (part-time)

Since the company is generating revenue, your accounting complexity will increase.  These needs can typically be filled with a part-time staff accountant.

Controller (part-time)

A financial controller is required to ensure efficient financial operations. This person will develop your month-end closing processes and maintain your budget vs. actual analyses.

CFO (part-time)

Companies at the seed stage can benefit significantly from engaging the services of a part-time CFO who can plan, implement, manage, and run the company’s overall financial activities.

Certified Public Accountant – CPA

A CPA is needed at this stage of the business cycle to ensure proper tax planning and filing of the tax returns. Tax returns may continually require more details as the business grows over time.

Technical Accounting considerations

Seed-level companies will also want to take into consideration the following:

The company should generally be switching from a cash basis to accrual basis.  If not fully accrual, it should be a form of modified accrual basis. It will help investors more accurately understand the traction of the company to date compared to a basic cash basis version of your financials. 

If you’re issuing stock options to employees, ensure that you perform a 409A valuation before issuing options to determine the worth of the shares. 409A is an assessment of the fair market value of the private company with the help of an independent appraiser. 

The company may also be eligible for the R&D tax credit and should work with its tax preparer to determine eligibility. If the company qualifies for the credit, it can offer great help in reducing your tax liability. 

The company should ensure that investment instruments (e.g., convertible notes, SAFE notes) are appropriately presented on the financial statements. Any interest accruals made should follow the requirements outlined by accounting standards.

Series A Round and Beyond

At this stage of a business’s life, the firm has traction and shows an ability to generate consistent revenue, although it may not yet be profitable. 

The business has established a small customer base but needs capital to scale. This requires changes to the internal capability of the company. 

Let’s take a look at the different accounting requirements related to this phase of the business cycle.

Operational Action Items 

Continue to iterate on the financial model. Expand its usage and extend on the functions of the financial model to get a comprehensive base for decision making.

Execute and improve upon consistent month-end close processes to ensure accurate, timely financial reporting. A solid closing creates the basis for your overall financial reporting process. For instance, different controls surrounding the recording and reporting of financial transactions need to be implemented.

Prepare a formalized board reporting package, establish a cadence of report preparation deadlines, and create a complete system for report timings and staff responsibility.

Begin to optimize accounting processes for operational efficiency and enhanced reporting structure. The following accounting processes may need special consideration:

  • Set up an expense reimbursement system.
  • Implement a company corporate credit card program.
  • Add additional reporting to your chart of accounts (i.e., departments, locations, etc.).
  • Integrate CRM or other operational data with accounting data for enhanced reporting (i.e., revenue by acquisition channel).
  • Evaluate the efficacy of Quickbooks Online or Xero in meeting accounting needs. You may have outgrown them and should explore more ERP-type solutions like NetSuite or Sage Intacct.
  • Ensure HR and benefits compliance with payroll systems and ensure an integration leads to the accuracy of the overall process.
  • Update cap table for each financing round and/or stock option/award issuance to ensure compliance with the regulatory procedures.

Tech Stack:

At this stage, your tech stack is building on the processes you implemented during the seed stage.

Jirav and Excel are invaluable for driver-based financial modeling and budget vs. actuals analysis. They can also generate professional-looking board reporting packages.

Expensify is an excellent software tool for managing expense reimbursement for your employees and managers.

Carta allows for accurate cap table management & 409A valuations (as discussed earlier in this article).

Gusto and Rippling are excellent software tools to manage your HR and payroll-related data. This software helps to manage and integrate HR and payroll-related data to increase its efficiency and operating effectiveness.

Accounting Resources Needed:

As your accounting needs and operations become more complex, your accounting team will need to grow.

You’ll probably need:

  • Full-time staff accountant or senior accountant to manage and monitor all of the data related to the accounting function
  • Part-time/full-time accounting manager to manage your financial reporting processes
  • Part-time/full-time financial analyst to study the patterns, find the gaps and drive operational excellence
  • Part-time/full-time controller (for developing month-end close processes and budget vs. actuals analysis)
  • Part-time CFO for financial modeling and strategic decision making
  • CPA firm to ensure proper tax filings & planning

Technical Accounting Considerations:

At this phase, the company should be moving to GAAP-compliant financial reporting.  In particular, you should focus on satisfying the following:

  • ASC 205 – Financial Statement Presentation: This ASC provides detailed guidance on the presentation of the financial statements and financial information to investors and other users. 
  • ASC 606 – Revenue Recognition: This accounting standard provides details about the timing of revenue recognition. Revenue should be recorded when services have been performed, or the product has been delivered. This requires proper documentation of intentions on the side of both parties for the expectations of services provided. 

However, a different standard applies to revenue recognition from the sale of software. This standard requires partial revenue recognition before the contract is fulfilled entirely.

  • ASC 705 – Cost of Sales and Services: This accounting standard contains two sub-topics: overall guidance on codification topics related to selling cost and accounting for consideration received from sellers, which states consideration should be accounted for by reducing the purchase price.
  • ASC 710 – Compensation: These accounting standards provide guidance related to different aspects of compensation like deferred compensation, paid absence, and all other forms of compensation.
  • ASC 730 – Research and Development: This standard provides guidance on which expenses should be expensed out and which expenses should be capitalized. ASC 730 provides a list of the included and excluded activities acquired for the R&D.
  • ASC 718 – Stock-based Compensation: ASC 718 prescribes the way companies charge expenses in the income statement under share-based payment. The standard provides three basic steps that should be followed:
  • Calculation of the fair value for an option
  • Allocation of the expense over the economic life of the option
  • Reflection of the expense in an income statement

At this stage, investors may also require that an independent public accounting firm audit the company to ensure compliance and reduce the risk to the investors.


Achieving accounting operational maturity is a challenge that requires different approaches depending on which stage a startup has reached. 

In short, more complex operational organizations require more intensive and robust accounting systems, processes, and people. 

If you need help getting these systems set up or want some guidance on what’s right for your company, we’d be glad to help with a free consultation. No matter which stage you’re at, our startup-specialized team can help you figure out what’s best for you and your company.

Published by Curt Mastio October 11, 2021
Curt Mastio