Founder finance controls: protect yourself and your investors' money

Joe Gilbert ACMA CGMA
Most founders are good at the product, the customers and the pitch. Fewer have set up the finance processes that investors expect to find. The gap rarely shows while the company is small. It shows when an investor asks a straightforward question and the answer takes a week to find. This guide covers the processes worth putting in place early, so you can answer with confidence.

Why this matters

When someone invests, they are trusting you with their money. Investors, lenders and acquirers will check how you look after it. Good processes protect the company, protect you as a director, and make due diligence faster and less stressful. We cannot promise any particular outcome from a due diligence exercise, but gaps in basic controls are among the first things that slow one down.

The processes to put in place

1. Keep proper records, up to date

Company law requires adequate accounting records, and directors are responsible for making sure they are kept. In practice, that means bookkeeping that is current, reconciled to the bank each month and held in cloud software, with invoices and receipts attached to transactions.

2. Control who can spend and who approves

Agree who can authorise payments and up to what level. Use two-person approval for larger payments where you can, keep bank access limited, and avoid paying personal costs from the company account. Written approval rules are simple and reassure investors.

3. Close the books every month

A monthly routine of reconciling banks, checking what is owed and owing, and reviewing the figures catches errors early. It also produces the monthly management accounts investors ask for.

4. Track the money you have raised

Know how investment money is being spent against the plan you gave investors. If you raised under SEIS or EIS, the funds must be used for the qualifying business activity, so keep a clear record. See our guide to SEIS vs EIS.

5. Report to your board and investors on a schedule

A short monthly update covering cash, runway, performance against forecast and key risks builds trust. Surprises are what damage it. Our guide to building a cash flow forecast shows what to include.

6. Keep your share records and filings in order

Maintain an accurate cap table, share register and Companies House filings. These are checked early in any investment and are often where errors are found. Our company secretarial service covers this.

7. Separate your own money from the company's

Director's loans, expenses and pay should be recorded properly and agreed, not left to the year end.

Be ready for due diligence

Due diligence is usually a request for documents and explanations. If these are easy to produce, the process is smoother:

  • Management accounts and filed accounts
  • A forecast with its assumptions
  • Bank reconciliations and a record of how investment funds were used
  • The cap table, share register and articles
  • Contracts, payroll and tax filings

Our guide to what investors expect from your finances has a pre-raise checklist, and advance assurance is worth planning before you pitch UK angels.

How Elm can help

We help founders put these processes in place and keep them running: bookkeeping and monthly accounts, forecasts, share records, and a fractional finance director to lead on funding and investor reporting. See our support for founders.

You do not need to have everything perfect. You do need to know where you stand and be able to show it.
Talk to us about setting up your finance processes