Finance Function Roadmap from Pre-Seed to Series B: Integrity, Reporting, Strategic Guidance

Finance Function Roadmap: Pre-Seed to Series B

Building a product and finding market fit consumes all of a founder’s energy. Finance often feels like a background task, a mix of paying bills and checking the bank balance. This works until it doesn’t. Suddenly, you’re scrambling to meet VAT or US state tax filings, flying blind on cash runway as complexity grows, or producing messy financial statements that can’t withstand investor due diligence. This isn’t a sign of failure; it's a predictable scaling challenge.

Knowing how to build a finance team for a startup is about layering capabilities at the right time. Rushing to hire a full-time CFO is as risky as waiting too long to hire a bookkeeper. This roadmap outlines a practical, phase-by-phase approach to scaling your finance operations from a founder-led function to a strategic engine, ensuring you have the right processes and people in place from pre-seed to Series B.

The Finance Hierarchy of Needs: A Foundational Understanding

Before diving into timelines and roles, it’s crucial to understand the three distinct jobs of any finance function. Like a hierarchy of needs, each layer builds upon the one below it. Attempting to deliver strategic guidance without reliable reporting is impossible, and reliable reporting is meaningless if the underlying transactions are a mess.

1. Transactional Integrity: This is the foundational layer. It’s the essential, non-negotiable work of ensuring your financial data is accurate and complete. This includes meticulous bookkeeping, timely payroll, vendor payments, invoicing, and tax compliance. Without this, everything else is guesswork built on a faulty premise. The goal here is accuracy and compliance.
2. Reporting and Insight: Once your transactions are clean, you can build the next layer. This involves transforming raw data into coherent financial statements: the Profit and Loss (P&L), Balance Sheet, and Cash Flow Statement. This is where you move from just recording history to understanding what it means. The goal is clarity and comprehension.
3. Strategic Guidance: At the top of the pyramid, finance becomes a forward-looking partner to the business. This involves financial planning and analysis (FP&A), building sophisticated forecasts, analyzing unit economics, and providing data-driven insights to inform critical decisions about hiring, pricing, and fundraising. The goal is to drive smarter, faster growth.

Early-stage financial processes must mature in this exact order. Skipping a step creates phantom insights and strategic blind spots. The rest of this guide walks through how to build each layer at the right stage of your company’s journey.

Part 1: Nailing Transactional Integrity (Your Pre-Seed to Seed Foundation)

At the pre-seed and seed stages, the primary goals are survival, speed, and compliance. The key question is: What is the absolute minimum needed to pay people, manage cash, and stay compliant? The focus here is entirely on establishing transactional integrity. Anything more is a distraction.

The Founder-Led Finance Function

The reality for most pre-seed startups is more pragmatic: the founder is the finance department. You’re managing invoices, running payroll, and reconciling bank accounts between product sprints and sales calls. A simple set of tools is perfectly adequate at this stage. In practice, we see that a basic tech stack (bank, accounting ledger, payroll) can support most companies to $1-2M ARR.

For US companies, this is often a bank like Mercury or Brex connected to QuickBooks Online and a payroll provider like Gusto. In the UK, the stack is similar, commonly featuring Xero as the accounting ledger. The key is to keep it simple and ensure these systems are connected from day one to minimize manual data entry.

When to Hire Your First Bookkeeper

Soon, managing the books becomes a drain on your most valuable resource: your time. A trigger to hire bookkeeping help is when finance tasks consume more than 5 hours of a founder's time per month. The choice is typically between a solo freelance bookkeeper and a specialized bookkeeping firm.

A solo bookkeeper can be cost-effective but creates a single point of failure if they get sick or leave. A firm offers redundancy, a broader range of expertise, and often better internal controls. This is valuable for navigating complexities like state-specific sales tax nexus in the US or cross-border VAT rules in the UK. The cost is manageable; a reputable bookkeeping firm typically costs $500 - $1,500 per month.

Establishing Your First Core Process: The Monthly Close

With professional help in place, you can implement your first core financial process: the monthly close. This is the recurring process of closing out the books each month to ensure all transactions are categorized and reconciled. It’s the rhythm that powers all future reporting. A consistent close process turns messy, real-time data into a clean, reliable snapshot of the previous month's performance. For a startup, a 15-business-day monthly close is an acceptable goal for early-stage companies.

Part 2: How to Build a Finance Team for Reliable Reporting (Seed to Series A)

As you grow from seed to Series A, your business becomes more complex. You have more employees, more customers, and more demanding investors. Transactional integrity is no longer enough. Now, you must use that clean data to understand the business and forecast the future. Your finance function must evolve to provide reliable reporting and insight.

Your First Financial Model

The centerpiece of this stage is the 3-statement financial model, typically built in Google Sheets or Excel. This model connects your P&L, Balance Sheet, and Cash Flow Statement, allowing you to see how decisions impact your entire financial position. The P&L shows profitability, the Balance Sheet provides a snapshot of assets and liabilities, and the Cash Flow Statement reveals your actual cash generation and burn. This becomes your single source of truth for your runway, which is critical when flying blind on cash flow is a major risk.

What founders find actually works is getting this model established early, even if it’s simple. It forces you to understand the core drivers of your business. For an e-commerce startup using Shopify, for example, accurately tracking inventory on the balance sheet and Cost of Goods Sold on the P&L is the only way to see true gross margin per product, a vital metric when cash flow is king.

Meeting Investor Expectations on Revenue Recognition

As you approach Series A, investor scrutiny intensifies, particularly around revenue. You must comply with formal revenue recognition standards. In the US, the standard is ASC 606; in the UK and other jurisdictions using IFRS, it is IFRS 15. The principles are similar: they provide a framework for recognizing revenue from contracts. This is especially important for SaaS companies with multi-year deals or professional services firms with complex project milestones. For instance, a SaaS company cannot recognize all the cash from an annual contract upfront as revenue; it must be recognized monthly over the life of the contract. Adhering to ASC 606 is the accounting standard for revenue recognition. [ASC 606] is not just a compliance checkbox; it’s a prerequisite for a smooth due diligence process.

Hiring Your First Senior Finance Leader

This is also the point where the finance function needs more senior leadership. A bookkeeping firm is great for recording history, but you now need someone to help interpret it and plan for the future. The trigger for a more senior finance hire (Fractional CFO or Controller) is typically around the $3M ARR mark.

• A Fractional CFO provides strategic, forward-looking guidance on a part-time basis. They focus on fundraising strategy, board reporting, and developing key metrics. They are your strategic partner.
• A Controller is more focused on historical accuracy, process improvement, and managing the close. They own the integrity of the numbers and ensure the accounting engine runs smoothly.

For many pre-Series A and Series A companies, a Fractional CFO is the right first senior hire to professionalize the function without the cost of a full-time executive.

Part 3: Scaling Finance Operations for Strategic Guidance (Series A to B)

After your Series A, the expectation shifts. Your board and investors now assume that your reporting is accurate and timely. The new mandate is to use financial data to make smarter, faster decisions and prepare the company for the rigors of a future audit. The finance function must become a strategic engine for the business.

Implementing Internal Controls

This starts with implementing basic internal controls to protect company assets and ensure data integrity. This doesn’t need to be bureaucratic. A simple example of an internal control policy for vendor payments is requiring founder or department head approval for any invoice over $1,000 and two executive approvals for any payment over $5,000. This simple workflow, managed via email or a tool like Ramp, reduces the risk of fraud and error without slowing the business down.

Focusing on Strategic Metrics

With robust data, you can now focus on the key startup metrics that truly measure the health and scalability of your business. These include LTV:CAC (Lifetime Value to Customer Acquisition Cost), Net Dollar Retention (NDR), and cohort performance. For a B2B SaaS business, an NDR over 110% shows investors that your existing customer base is not only staying but also spending more over time, a powerful indicator of product-market fit. These metrics become the language you use to communicate with your board.

Finance for Deeptech and Biotech

Biotech and deeptech startups at this stage have a different focus. While they may be pre-revenue, meticulous financial management is still critical. They need to track R&D costs by project or compound to support grant reporting and maximize R&D tax credits. Using classes in QuickBooks or tracking categories in Xero is a practical way to track costs at the project level to support claims. US companies should consult IRS guidance on Form 6765 for R&D credits.

Upgrading Your Tech Stack: FP&A Software vs. ERP

As the team and transaction volume grow, spreadsheets can become a bottleneck. This is when companies consider dedicated FP&A software like Cube or Datarails. These tools sit on top of your accounting ledger to automate reporting, forecasting, and scenario planning. It's important to distinguish these from a full Enterprise Resource Planning (ERP) system like NetSuite. An ERP implementation is typically a 6-month, $50k+ commitment. Furthermore, an ERP is typically a post-Series B initiative, once the finance team has 3+ members. Moving too early is a costly distraction from core business priorities.

Hiring Your First Full-Time Finance Executive

The Fractional CFO who got you through the Series A may now need to be supplemented or replaced. As the business approaches Series B, the need for a hands-on, full-time leader becomes apparent. This is often a VP of Finance or a senior Controller who can manage the growing team, own the audit process, and serve as a daily strategic partner to the leadership team.

Practical Takeaways: Your Startup Finance Checklist

Building a finance function is a marathon, not a sprint. By aligning your finance roadmap with your funding stages, you can avoid common pitfalls and build a strategic asset that fuels growth. The process consistently follows the hierarchy of needs: first integrity, then insight, and finally, strategy.

Here’s a simple checklist to guide your next steps based on your current stage:

• Pre-Seed/Seed Stage (Focus: Transactional Integrity)
  • Set up a clean accounting ledger (QuickBooks or Xero) from day one.
  • Hire a bookkeeping firm when you spend more than five hours a month on finance tasks.
  • Establish a monthly close process, aiming for a consistent 15-day close.
• Seed/Series A Stage (Focus: Reporting and Insight)
  • Build your first 3-statement financial model in a spreadsheet to get a firm grip on your cash runway.
  • Ensure you are compliant with revenue recognition standards like ASC 606 (US) or IFRS 15 (UK/International).
  • Consider hiring a Fractional CFO or Controller around the $3M ARR mark to level up your financial leadership.
• Series A/Series B Stage (Focus: Strategic Guidance)
  • Implement simple internal controls for payments, expenses, and system access.
  • Develop a dashboard of key business metrics (LTV:CAC, NDR) and report on them monthly.
  • Evaluate dedicated FP&A software when spreadsheets become a bottleneck.
  • Plan for your first full-time senior finance hire as you scale past $10M ARR.

Scaling finance operations methodically builds investor confidence, provides the clarity needed to navigate uncertainty, and ultimately helps you build a more durable, valuable company. Continue at the hub for setting up your finance function.

Frequently Asked Questions

Q: At what revenue stage should I hire my first full-time finance person?
A: Most startups hire their first full-time, in-house finance person (often a Controller or Head of Finance) between $5M and $10M in annual recurring revenue. Before that, a combination of a bookkeeping firm and a Fractional CFO provides the necessary skills without the full-time cost.

Q: Can my bookkeeper also handle strategic FP&A and forecasting?
A: Generally, no. Bookkeeping focuses on accurately recording historical transactions (transactional integrity). FP&A is a separate, forward-looking skill set focused on financial modeling, forecasting, and strategic analysis. Trying to merge these roles too early often leads to neither job being done well.

Q: Do I really need an audit before my Series B?
A: While not always mandatory, having your prior year's financial statements audited is becoming a standard expectation for Series B due diligence. An audit provides investors with a high level of assurance in your numbers. Starting the process early prevents last-minute scrambles that can delay your fundraising round.

Q: What is the biggest finance mistake early-stage founders make?
A: The most common mistake is neglecting transactional integrity from day one. Co-mingling funds, using messy spreadsheets instead of proper accounting software, and not reconciling accounts creates a financial "debt" that is expensive and time-consuming to clean up later, often during a critical fundraising or diligence process.