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Help, I Need GAAP Financials! 

Help, I Need GAAP Financials! 

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Paul Jun
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Help, I Need GAAP Financials! 

Your investors may have told you they expect GAAP financials, or you might’ve seen it in your legal docs. Almost all financing documents, even for the earliest-stage companies, include this nearly-identical clause:

The Company shall deliver after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all prepared in accordance with GAAP

Pilot provides financials to 1,500+ clients in this same situation and under the same legal framework, and a number of these clients have successfully undergone financial statement audits. Pilot is well-versed in the Generally Accepted Accounting Principles and takes a stage-appropriate and industry-standard approach to utilizing those principles. Our policies and processes (detailed here) are designed by our Head of Operations, a former KPMG public company auditor and public company accountant at Dropbox. 

Are there caveats? Yes. Does that mean your startup, with or without Pilot, will comply with all 100,000 pages of guidance that FASB has ever published? No, not even the largest and most sophisticated public companies fully comply with all the guidance. Part of the reason that even public companies hire independent auditors is to help make adjustments to be in closer compliance with GAAP. It’s also worth noting that GAAP guidance extends well beyond your financial statements in your company’s internal controls and general compliance. 

Public companies might spend hundreds of millions of dollars on accounting and tens of millions of dollars on audits—and despite that, you’ll find that most public companies, including $200b companies like Salesforce, still note their own GAAP limitations due to cost:

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected (Salesforce 10K)

You probably have slightly fewer resources than Salesforce—and that’s OK. Nothing here is absolute, nor is it what your investors should be expecting. But by having good internal systems (which we can help design!), keeping detailed records, working closely with Pilot, and having a great independent auditor (we can make referrals here), you can go a long way towards what investors expect from a GAAP perspective.


This post was written by Paul Jun, CFO at Pilot, in conjunction with Ashley Schagrin, Head of Operations at Pilot.

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