5 Things Your CPA Should Tell You Before You Raise a Round
Kimberly Green | 2026-04-14
5 Things Your CPA Should Tell You Before You Raise a Round Your books are about to get audited by people with a lot of money at stake. If your historical accounting is messy, they'll find it. And it'll cost you. A good CPA doesn't wait for the due diligence catastrophe. They tell you now what needs fixing. Here's the fundraising accounting checklist every founder needs. 1. Investor Due Diligence Will Surface Discrepancies in Your Historical Books VCs and institutional investors bring in forensic accountants. These aren't your bookkeeper. They're looking for red flags: misclassified expenses, revenue recorded in the wrong period, cash that doesn't match the books. A single unexplained transaction becomes a three-week rabbit hole during diligence. Three unexplained transactions become a negotiation problem—and a costly one. Your CPA should ask: Which months look vulnerable? Are there periods where your bank deposits and revenue records don't tie out? Have you reclassified expenses after the fact? If yes to any of those, fix it now. Fixing your own books costs you hours. Fixing them under investor scrutiny costs you millions. 2. Your Revenue Recognition Needs to Match What Investors Expect Under ASC 606 (the GAAP standard for revenue recognition), you can't just recognize revenue whenever it feels right. The sale must be complete, the customer must be committed, and you must have a reasonable expectation of cash collection. Here's where founders get tripped up: If you're recognizing revenue on signed contracts but those contracts have cancellation windows or refund conditions, investors will push back hard. Example: You sign a $100K annual contract and recognize it immediately. But the contract allows the customer to cancel within 30 days. GAAP says you shouldn't recognize the full $100K upfront—only what's truly earned. Another example: You have a $250K deal with four quarterly milestones. If you recognized the whole $250K when the deal was signed (not when milestones were hit), your revenue is overstated. Investors will spot this in due diligence and it becomes a valuation problem. Your CPA should audit your revenue recognition policy against your actual contracts. Investors will. Better to know now than during a data room review. 3. Cap Table Accounting and Equity Compensation Need Specific Treatment Most generalist CPAs aren't trained on ASC 718 (accounting for stock-based compensation). This is a problem for startups. When you issue equity—whether it's founder shares, employee grants, or option pools—the accounting affects your balance sheet and P&L....
