The Series A Finance Ops Audit: What Your Current Systems Are Missing

# The Series A Finance Ops Audit: What Your Current Systems Are Missing

You just closed Series A. Congratulations. Your cap table is cleaner, your bank account is fuller, and your board has expectations.

Now comes the part nobody warns you about: your financial operations infrastructure is probably broken in ways you can't see yet.

In our work with Series A startups, we've conducted hundreds of financial audits in the post-close window. Most founders expect us to find accounting errors or missing documentation. What we actually find is more systemic—and more expensive to fix later.

Your Series A financial operations audit isn't about catching mistakes. It's about identifying the structural weaknesses that will cascade into problems during your next fundraise, Series B scaling, or unexpected downturn.

Let's walk through the audit framework we use, and more importantly, what to do when you find gaps.

## The Series A Finance Ops Audit: Beyond the Numbers

When we talk about financial operations audits for Series A companies, most founders think we're talking about reconciliation or whether your books are clean. That's the minimum bar, not the actual problem.

The real audit is operational: Can your current systems and processes actually support the next 2-3 years of growth without breaking?

We focus on five critical areas that determine whether your finance ops will scale or become a bottleneck.

### 1. Cash Management and Forecasting Visibility

This is the first thing we audit, and it's almost always broken at Series A.

Here's what we typically find: Founders have a rough sense of monthly cash burn. They know their current runway. They have no idea what happens if they hire that sales engineer six weeks earlier, or if a customer delays payment by 30 days, or if their AWS bill spikes because of unexpected usage.

We had a Series A SaaS founder tell us their runway was "about 18 months." When we built a proper 13-week cash flow model, we discovered they actually had 14 months if everything went perfectly, and 10 months if two major customers delayed payment by 60 days (which happened to them the previous year).

That's the difference between sleeping at night and managing by surprise.

The audit questions:
- Do you have a rolling 13-week cash forecast that updates weekly?
- Does it include payroll timing, vendor payments, and customer payment cycles?
- Can you model the cash impact of hiring decisions before you make them?
- Do you know your actual cash conversion cycle by product line or customer segment?

If you answered "no" to more than one, you have a critical gap. [Link to cash flow visibility article](/blog/the-cash-flow-visibility-gap-why-founders-manage-by-surprise/) for a deeper dive.

### 2. Unit Economics Attribution and Tracking

Series A companies usually have some version of unit economics. What they don't have is agreement on how to measure them.

We audited a marketplace startup that reported a CAC of $800 and LTV of $8,000. When we traced the actual customer journey, we found:
- CAC calculation didn't include organic sourcing costs or affiliate commissions
- LTV calculation used projected lifetime value, not actual cohort retention data
- No one had defined what "customer" meant (free trial? first purchase? first paid month?)

The real CAC was closer to $1,200. The real LTV, based on actual behavior, was $5,500.

That's not a rounding error. That changes whether your unit economics work.

The audit questions:
- Is your CAC/LTV calculation consistent across all marketing channels?
- Are you using cohort analysis or assumed lifetime values?
- Does your CAC include all customer acquisition costs (ads, salary, tools, affiliate commissions)?
- Who owns unit economics, and how often do you update them?
- Can you break down unit economics by customer segment or acquisition source?

This ties directly to your board reporting and fundraising credibility. [CAC vs. LTV article](/blog/cac-vs-ltv-the-real-profitability-equation-founders-get-wrong/) covers the specific math most founders get wrong.

### 3. Revenue Recognition and Deferred Revenue Management

This becomes critical at Series A, and almost no one is doing it right.

When you have $2M ARR spread across 50 customers with monthly billing, revenue recognition is straightforward. When you start closing annual contracts, multi-year deals, or usage-based deals, everything breaks.

We worked with a SaaS founder who signed a $300K annual contract. Finance recorded it as revenue. Sales celebrated. Three months later, the audit revealed they should have recognized only $75K in that quarter, with the rest deferred.

More importantly, they had no process to track deferred revenue by contract. They couldn't tell their CFO what revenue was actually earned versus what was sitting in deferred revenue liability.

The audit questions:
- Do you have a deferred revenue schedule by contract?
- Is revenue recognition policy documented and applied consistently?
- Can you reconcile monthly revenue to actual customer contract terms?
- Who reviews revenue recognition for accuracy?
- Do you know your true ACV (annual contract value) versus discounted sales figures?

This gets audited carefully by investors and can slow down fundraising if it's wrong.

### 4. Expense Categorization and Cost Allocation

Everyone thinks their expense categorization is fine. Almost everyone is wrong.

Expense categorization matters because it determines:
- Your gross margin and unit economics
- How you allocate costs to product lines or business units
- What you report to investors
- What you report to tax authorities

We audited a B2B marketplace that was reporting 65% gross margin. When we traced which expenses were being classified as COGS versus operating expenses, we found:
- Payment processing fees sometimes coded as COGS, sometimes as opex
- Customer support partially in COGS (for enterprise customers) and partially in opex (for self-serve)
- Infrastructure costs that didn't belong in COGS but were coded there

The actual gross margin was 58%. That changes your CAC payback period, your unit economics, and your investor story.

The audit questions:
- Are you using a consistent chart of accounts with clear definitions?
- Have you defined what goes into COGS versus operating expenses?
- Is expense categorization tracked at the time of transaction, or reconciled afterward?
- Does someone review and adjust categorization regularly?
- Can you break down your P&L by department, product line, or customer segment?

### 5. Financial Close Process and Reporting Cadence

This is where we see the biggest operational drag.

At seed stage, financial close was probably "whenever the accountant got around to it." At Series A with investors and board meetings, you need a real process.

We found one Series A founder manually reconciling bank accounts in a spreadsheet the day before board meetings. Another was waiting 45 days after month-end to close the books. A third had no formal financial close process at all—the CEO would ask the bookkeeper for numbers whenever needed.

None of these founders had a financial close calendar, a documented process, or accountability for timeline and accuracy.

The audit questions:
- Do you have a documented monthly financial close process with owners and deadlines?
- Can you close the books within 5-7 business days of month-end?
- Is there a monthly board or investor update based on actual financials?
- Who reconciles balance sheet accounts (bank accounts, credit cards, payroll accruals)?
- Do you have a quarterly financial review meeting with your entire leadership team?
- Are your financials prepared under accrual accounting, or is there confusion about timing?

This directly impacts [CEO financial metrics and measurement timing](/blog/ceo-financial-metrics-the-measurement-timing-problem/), which affects decision-making speed.

## The Common Gap: Systems vs. Processes

Here's what we see most often: Series A startups have decent accounting systems (QuickBooks, NetSuite, Xero). They don't have finance ops processes.

A system is software. A process is how people use that software to actually run the business.

You can have perfect QuickBooks data and still not be able to answer "What's our cash position at the end of next week if we hire two engineers and don't collect from our biggest customer?" That's a process problem, not a system problem.

When we audit Series A finance ops, we're looking for:

1. **Clear ownership**: Who owns the 13-week cash forecast? Who updates it? When?
2. **Documented workflows**: If your finance person left tomorrow, could the CEO do the close?
3. **Automation**: Are you manually reconciling things that could be automated? Are you manually pulling data for reports?
4. **Timing alignment**: Does your financial close process match your board meeting schedule? Your fundraising timeline?
5. **Cross-functional communication**: Do your sales team know how payment terms affect cash? Does your product team understand unit economics?

## What to Do After Your Audit

When we find gaps (and we always find gaps), here's our framework for prioritization:

**Critical (implement in 30 days):**
- 13-week rolling cash forecast
- Monthly financial close process with defined timeline
- Documented revenue recognition policy
- Balance sheet reconciliation (especially cash and debt accounts)

**High Priority (implement in 60-90 days):**
- Unit economics tracking and cohort analysis
- Expense categorization audit and chart of accounts cleanup
- Deferred revenue schedule and tracking
- Monthly board/investor financial package

**Important (implement by next fundraise):**
- Segment profitability analysis
- Customer cohort analysis by acquisition source
- Runway and cash burn forecasts by scenario
- R&D capitalization and tax credit tracking (if applicable)

Most of these don't require new software. They require process discipline and someone to own them.

## The Fractional CFO Question

This is where we typically see founders ask: Do we need to hire a full-time CFO, or is this a fractional CFO situation?

The audit answers that question. If you have critical gaps in 3+ areas, or if your CEO is spending 8+ hours per week on finance ops issues, fractional CFO support makes sense during this transition period.

We have a detailed decision framework for this: [The Fractional CFO Decision Framework](/blog/the-fractional-cfo-decision-framework-beyond-the-hireno-hire-question/).

## Audit as Investor Confidence

Here's something founders don't realize: conducting this audit and fixing gaps is one of the highest-ROI things you can do for your Series B fundraising.

Investors don't trust founders who can't answer operational questions about their own finances. They do trust founders who understand their cash position, their unit economics, and their financial close process.

When we work with Series A companies on this audit, we're not just fixing broken systems. We're building the financial credibility that makes Series B conversations faster and less painful.

## Next Steps: Start Your Audit

You don't need a full fractional CFO to conduct this audit. You need someone to ask these five questions systematically and trace the answers through your actual systems.

Start with the cash forecast. Most Series A startups we work with identify their biggest gap there. If you can't model your cash position 13 weeks out with reasonable accuracy, that's your starting point.

The audit itself usually takes 2-3 weeks if you do it yourself, or 4-5 days if you have an external person asking the questions and documenting the gaps.

If you'd like a structured audit of your current finance ops, Inflection CFO offers a free financial operations audit for Series A companies. We'll walk through each of these five areas, identify your specific gaps, and give you a prioritized roadmap to fix them.

Reach out to discuss your situation—no obligation, just honest assessment of where the gaps are and what actually needs to be fixed first.