What Financial Statements Does a Startup Need?
Three statements form the foundation: profit and loss, balance sheet, and cash flow statement. They work together. Looking at one without the others gives you an incomplete picture.
The profit and loss statement shows revenue minus expenses over a period. It tells you if you’re making or losing money. For pre-revenue startups, it’s mostly expenses, which is fine. You’re tracking burn, not profit.
The balance sheet shows what you own, what you owe, and what’s left over at a specific point in time. Assets, liabilities, equity. It tells you the financial position of the company. Investors look here to see how much runway you have and how the cap table translates to actual numbers.
The cash flow statement tracks money moving in and out. This is where startups often get surprised. You can be profitable on paper and still run out of cash. The P&L says one thing, the bank account says another. Cash flow explains the gap.
Most founders live in the P&L and ignore the rest. That works until an investor asks for a balance sheet and you don’t have one. Or until you’re profitable but can’t make payroll because receivables are stuck at net-60.
If you’re raising money, clean financials means all three statements, prepared consistently, ready to share. Investors expect them. Due diligence requires them. Not having them slows everything down.
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