Quick Cash Controls for Pre-Seed Startups: Not About Bureaucracy, It's About Survival

How to Set Up Cash Controls for Startups: A Quick Guide

As a pre-seed startup founder, you manage everything, and that includes the finances. Your focus is on building a product and finding customers, not designing complex accounting procedures. Yet, mismanaged cash is a real risk that can shorten your runway and threaten your company’s future. The Association of Certified Fraud Examiners (ACFE) 'Report to the Nations 2022' found that small businesses with fewer than 100 employees suffer the highest median losses from fraud, often due to a lack of internal controls. Implementing simple cash handling procedures isn't about bureaucracy, it's about survival. The goal is to establish lightweight cash flow safeguards that protect your startup without slowing you down. This guide provides a practical framework for how to set up cash controls for startups, focusing on what a small team can implement today.

Part 1: Solving for Segregation of Duties with a Small Team

Segregation of Duties (SoD) is the core principle that no single person should control all parts of a financial transaction. This simple separation of tasks is a powerful tool to prevent both accidental errors and intentional fraud. The immediate question for founders is how to implement this when the entire team can fit in a single car. The reality for most pre-seed startups requires a pragmatic approach. You don't need perfect SoD, you need practical SoD.

What founders find actually works is a simple two-step process. For a deeper look, see the Segregation of Duties for Small Finance Teams guide. This involves splitting financial responsibilities between two individuals, typically the founders.

1. Preparation: One founder is responsible for initiating or preparing payments. This person receives invoices, verifies them against services rendered, and queues them for payment in the company’s banking or bill pay system.
2. Approval: The second founder is responsible for approving and releasing the funds. They review the queued payment, check the supporting invoice, and give final authorization.

This simple division ensures a second set of eyes reviews every dollar that leaves the company. It’s a foundational element of early-stage finance controls that creates a secure payments process from day one. While traditional bank portals can make this difficult, modern banking and spend management platforms (like Rho, Brex, or Mercury) have this functionality built-in. You can assign user roles, such as 'Preparer' and 'Approver', to enforce this workflow automatically.

For example, for a US-based deeptech startup using QuickBooks, one founder could create a bill payment. This action syncs to the banking platform and appears in the payment queue. The second founder receives a notification, logs in, reviews the attached invoice and payment details, and approves the transaction. Neither founder can complete the entire process alone, creating a clear and durable audit trail.

Part 2: Achieving Real-Time Cash Visibility to Manage Your Runway

Lacking a clear, real-time view of your cash position is a common source of founder anxiety. When funds are split between a primary bank account, a Stripe account for revenue, and payment obligations tracked in a spreadsheet, it is easy to be surprised by a low balance. This makes managing startup expenses and planning for payroll or supplier payments unnecessarily stressful. The solution is to create a single source of truth for your cash.

Step 1: Centralize Your Financial Data

First, centralize all your financial data. Connect your bank feeds, corporate credit cards, and payment processors directly to your accounting software. This automation eliminates manual data entry, reduces the risk of errors, and provides a consolidated, near-real-time view of your financial position. For a UK-based SaaS company, this typically means linking their HSBC account and Stripe feed directly to Xero. For a US e-commerce brand, it means connecting their Shopify and bank accounts to QuickBooks.

Step 2: Implement a 13-Week Cash Flow Forecast

Second, implement a 13-week cash flow forecast. This does not need to be a complex financial model built by an analyst. A simple spreadsheet that maps out your expected weekly cash inflows (customer payments, funding tranches) and outflows (payroll, rent, key software subscriptions) is more than sufficient at this stage. The key is consistency. Update it once a week to maintain a rolling three-month view of your runway. This forward-looking visibility allows you to anticipate cash crunches and make critical decisions before they become emergencies. This forecast is one of the most critical tools for effective startup cash management.

Part 3: Building a Lightweight Approval Workflow That Scales

Using Slack messages or email chains for expense approvals feels fast, but it creates significant risk and operational debt. These ad-hoc methods lack a consistent audit trail, which can erode investor confidence and create major headaches during a due diligence process. The answer isn't a complex enterprise system, but a simple, tiered approval workflow that scales with your spending. Think of this system as a set of guardrails, not bureaucratic gates.

To start, establish clear spending thresholds. A common framework that provides team members with autonomy while maintaining financial control is:

• Under $500: These expenses can be paid via a corporate card without pre-approval. This empowers your team to buy necessary software, office supplies, or other small items without friction. The control here is a monthly review of card expenses in your accounting software (QuickBooks or Xero) to ensure they align with business needs.
• $500 to $5,000: Any payment in this range requires one founder's approval. This is typically managed within your bill pay software or banking platform, where an invoice can be attached and an approval is electronically recorded, creating a clean record.
• Over $5,000: All significant expenditures require both founders' approval. This dual-control system ensures major financial commitments, such as vendor contracts or capital equipment purchases, receive careful review from the leadership team.

To make this process efficient, institute a weekly ‘payment run’ day. All approved bills due are queued up for final review and payment on one specific day, such as every Thursday. This batching process prevents constant interruptions, streamlines financial operations, and builds a durable audit trail for every payment.

Practical Takeaways: When to Level Up Your Controls

Implementing basic financial controls early is a strategic advantage, not a distraction. It builds a foundation of discipline that supports growth and instills confidence in investors. The three core controls to establish now are practical segregation of duties, a centralized real-time cash view supported by a 13-week forecast, and a tiered approval workflow.

These simple cash handling procedures will serve you well through the pre-seed and seed stages. You will know it is time to level up your tools when your operational complexity increases. The most common trigger to implement a dedicated AP and bill pay tool is when your monthly spend exceeds approximately $50,000. At that point, the volume of invoices and payments often justifies a more specialized system. Until then, these foundational controls provide the security and visibility you need to manage your runway effectively and prevent fraud in your startup. Explore the Internal Controls hub for more resources.

Frequently Asked Questions

Q: What if I'm a solo founder? How can I segregate duties?
A: For a solo founder, you can achieve practical segregation of duties by involving a trusted external partner. For payments over a set threshold, require approval from a part-time bookkeeper, a fractional CFO, or a board advisor. This creates the necessary second look at significant cash outflows.

Q: Is a spreadsheet good enough for a 13-week cash flow forecast?
A: Yes, at the pre-seed stage, a spreadsheet is ideal. The goal is clarity and speed, not a complex financial model. A simple spreadsheet is perfect for tracking weekly cash inflows and outflows, helping you manage your runway effectively and make proactive financial decisions.

Q: How do these cash controls help with fundraising?
A: Strong early-stage finance controls demonstrate operational discipline and reduce risk, which gives investors confidence. A clean audit trail, a clear view of cash management, and predictable financial processes make the due diligence process significantly smoother, faster, and more successful.