How Long Can You Realistically Put off Your First Audit for?

This week we have the following CFOs answering your reader questions:

Today we’re covering:

Let’s get into it!

Chris from Zeta:

It is not a “business book” but it’s a powerful, emotional read about a father’s relationship with his autistic son. Autism has touched our family’s life and it’s a cause we support. The book is called “Born Lucky” by Leland Vittert.

Michiel from Remote:

Since you’re headed to Australia, you need a book that’s as dense as a 10-K but a bit more readable. My pick is "The Signal and the Noise" by Nate Silver. It’s about forecasting, probability, and why humans are generally terrible at predicting the future. The lesson that stuck with me is that adding more data doesn't necessarily lead to better predictions. In the world of finance we are constantly bombarded by noise: a one-off churn event, a weird month of AWS spend, or a competitor’s stunt. The job of a finance leader isn't to report every data point but to filter out the static so the CEO and the Board can see the actual signal. 

Chris from Zeta:

While it may seem early to bring on an auditor, I believe it is a worthwhile investment to do it sooner than later. The auditor can be a valuable advisor and business partner in addition to serving their functional duty. Their perspective across industries and seeing how common challenges are overcome is invaluable.

Michiel from Remote:

Audits are about as fun as a root canal, and they cost significantly more. You can delay a formal audit until it’s mandatory or you need it for e.g. a fundraise. But the real question to ask yourself is whether there is anything in the numbers that you feel uncomfortable about. Why is your board asking this now? Is your revenue recognition a little shaky? Are you unsure about your tax strategy? It’s better to get some advice on this now than to have it blow up during due diligence.

CJ from Mostly Metrics:

I’d say after $20 million you’re lucky to get away with any year you don’t have to get an audit done. $10 million is honestly a bit early. I’d try to get away with another 12 months if you can. Buuuut if you are a total mess when it comes to rev rec, then it’s better to take one on the chin now than have an entire additional year of hard re work.

plus, remember - in your first audit they also do an audit on the year before that for a baseline. So it’s 2x the work.

Chris from Zeta:

The weekly sales pipeline meeting is THE MOST important cadence a company has. To get the highest ROI, I suggest the following: