13 of the best startup tools to achieve great financial hygiene

Jeff Erickson
June 30, 2022

Compare a startup in its first month against that same startup three years later, after it has closed its Series A funding round. You might think you’re looking at two completely different companies.

The brand new startup is little more than a website and a great idea, while the third-year startup may have a team of 100 people and thousands in monthly revenue. Every business is different, but we know the cash flow of a successful startup changes drastically from day one to day 1,000.

Across the life cycle of an early-stage startup, the financial statements change drastically. But it’s important for founders to prioritize strong financial hygiene from the very beginning.

In this post, we’ll look at some of the best startup tools you can use to achieve great financial hygiene and set the stage for sustainable growth.

The early-stage startup life cycle can be broken down into four main funding stages: pre-seed, seed, Series A, and Series B. As a startup progresses through these stages, it’s increasingly important for the founders to implement financial tools and services that maintain great financial hygiene.

Key takeaways:

• Lay a strong financial foundation early: Implementing robust financial systems like accounting, financial modeling, and cap table management during the pre-seed stage ensures smooth scaling and builds credibility with investors from the start.
• Adapt and professionalize as you grow: Financial tools and expertise must evolve with your startup’s complexity. Transitioning to advanced software and hiring or outsourcing financial professionals by Series A is crucial for managing detailed finances and investor relations.
• Consistency drives sustainable success: Prioritizing financial hygiene at every stage of growth fosters transparency, enables seamless fundraising, and establishes a foundation for long-term scalability and investor confidence.

The pre-seed stage

The pre-seed funding stage generally refers to the early period in which a startup is just getting its operations off the ground.

During the pre-seed stage, founders typically invest money from their own pockets to scale operations – this is also known as bootstrapping.

Although the business is still fairly new and may not have many financial systems in place, it’s important for founders to lay the foundation for financial hygiene by identifying and implementing the best startup tools to fit their operation at its current scale.

Accounting systems: Pre-seed

Accounting software packages like Quickbooks, Xero, and Pilot provide a simple and scalable platform to track your monthly cash flow, expenses, payroll, and revenue.

Financial model: Pre-seed

Consider implementing a financial model as early as the pre-seed funding stage. Early financial models have typically been executed in Excel or Google Sheets. Today, however, there’s a new breed of financial modeling software on the market that is affordable for even the smallest startups.

Software like Forecastr lets you build a robust financial model with many features you won’t find in a spreadsheet.

Capitalization table: Pre-seed

A capitalization table (or cap table) shows the equity capitalization of a startup. The capitalization table provides an intricate breakdown of shareholder equity in the company. For businesses seeking investment, we recommend using an online platform such as Carta, or Ledgy.

The seed stage

After the concept stage, a startup moves into the seed stage. At this stage, founders typically begin to approach investors (friends, family, or angel investors) to seek out financial support for the proven business concept.

Accounting systems: Seed stage

Because startups need to keep accurate records of all their financial transactions for tax and legal purposes, solid accounting systems become crucial at this stage. Proper accounting is a must have for sound financial hygiene.

Financial model: Seed stage

During the seed stage, a robust financial model is non-negotiable. A strong model shows investors the amount of funding you need, when you need it, and how you will spend the money.

Capitalization table: Seed stage

As you achieve success in fundraising, you must diligently track your equity breakdown. The same services we recommended above are still the best options at the seed stage.

Series A funding stage

Once a business has developed a proven track record of success, the company may choose to seek Series A funding. Series A funds are often used to expand the user base, create additional product offerings, or scale existing offerings across new markets.

Accounting systems: Series A

At this stage, your company’s internal accounting systems should be robust and provide a detailed and accurate picture of your finances.

Financial model: Series A

A financial model is a must-have at this stage. Don’t expect to close your Series A funding without one. Your model shows how investment funds will be used to stimulate growth, and the expected time frame for that growth to occur.

Capitalization table: Series A

At this stage, your company will likely have received investment money from various funds, and managing shareholders will become an increasingly complex task.

Series B and beyond

Series B rounds take the business beyond the development stage by expanding market reach using additional investor funds.

The best startup tools for financial hygiene

We’ve covered a lot of information in this post, following the journey of financial hygiene from concept to corporate offices. Here’s a quick recap of the best startup tools we’ve recommended along the way:

Financial modeling

• Forecastr

Accounting systems

• Quickbooks
• Xero
• Pilot

Accounting services

• Decimal
• Countabl
• Fireside bookkeeping

Cap table management

• Carta
• Ledgy

These tools and metrics will remain relevant throughout the life cycle of your startup. If you prioritize this infrastructure from day one to create great financial hygiene, you’ll set yourself for sustainable growth and successful fundraising.

Common FAQs

• What software do startups use?
  Startups use a variety of software to manage operations effectively. Popular choices include accounting software like QuickBooks or Xero, financial modeling tools such as Forecastr, and cap table management solutions such as Carta.

• Which type of startup is best?
  The best type of startup depends on your goals, skills, and market opportunities. Whether it's tech, healthcare, consumer goods, or another sector, the most successful startups solve real problems.

• What is the best business form for a startup?
  The best business form for a startup depends on factors like liability, funding needs, and tax considerations. Many startups choose a Limited Liability Company (LLC).

From idea to Series A: The importance of financial hygiene

Every successful startup is built on a foundation of strong financial management. From the pre-seed stage to Series A and beyond, the tools and practices you implement will shape your company’s ability to scale, secure funding, and maintain investor confidence.

In this post, we’ve explored how startups can adapt their financial systems as they grow, from simple accounting software and spreadsheet models to advanced financial platforms and dedicated professional support.