5 Things Your CPA Should Tell You Before You Raise a Round

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. If you're not recording the fair value of the equity grant and amortizing it correctly, your financials are wrong.

Investors will look at your cap table and ask: How much expense have you recorded for this? If you say "nothing," you're telling them your books aren't clean.

OLarry handles this correctly. They treat equity grants as what they are: a real cost to your business. And they document the valuation methodology so investors aren't left guessing.

Before fundraising, your CPA should reconcile your cap table to your accounting records. Every grant, every vesting schedule, every secondary sale. This is tedious. But it saves you in diligence.

4. Your Entity Structure May Need to Change Before Closing

Some entity structures work for bootstrapped companies. They don't work for institutional capital.

If you incorporated as an LLC with multiple members, you might need to convert to a C-Corp before investors write a check. If you have complex subsidiary structures or international holding companies, investors will require restructuring before they'll close.

These changes can take weeks. If your CPA waits until you're in term sheet negotiations to mention it, you've lost months. And if they get it wrong, you could owe unexpected taxes on the restructuring.

A proactive CPA asks now: What does your investor expect your structure to look like? Are you there? If not, what's the roadmap?

This is critical if you have international operations or founders abroad. OLarry specializes in international tax strategy for founders—they can design a structure that works for your actual investor profile and global operations, not just today's tax convenience.

5. R&D Expense Treatment Affects Your Balance Sheet in Ways Investors Will Question

Section 174 of the Internal Revenue Code changed how you can treat R&D expenses. For many startups, this meant a significant change in how software development costs are capitalized and amortized.

If you've been expensing your development costs immediately and investors are used to seeing them capitalized and amortized over multiple years, they'll ask why. If you've been capitalizing but not consistent with industry practice, they'll ask why.

The treatment matters because it affects profitability reporting. A company that expenses R&D looks less profitable than one that capitalizes it—all else equal.

Your CPA should explain how you're treating R&D and why it makes sense given your industry and investor expectations. Don't leave this to be a surprise question on a data room review.

Your Fundraising Accounting Checklist

The best time to fix accounting problems is before investors see them. A CPA who thinks like an operator—not just a tax preparer—flags these issues early.

Before you start fundraising conversations, verify with your CPA:

• Historical books tie out: no unexplained transactions, no timing mismatches between bank and revenue records
• Revenue recognition policy is documented and audited against actual contracts
• Equity grants and cap table are fully reconciled to accounting records
• Entity structure is optimized for your investor type (especially if international)
• R&D expense treatment is explained and consistent with investor expectations

If your CPA doesn't bring these up unprompted, that's a signal you need one who does.

OLarry specializes in exactly this: founder-focused, internationally-savvy accounting. They work with emerging wealth founders who know that clean books don't just satisfy due diligence—they open doors. Their rates run $2,500 to $50,000 annually (fixed fee), and their 5.0 rating from 7 reviews reflects their track record with founders in this exact position.

Before your first investor meeting, get these five things right.