📬 Gone in sixty seconds: Speed-reading financial statements

Your team (and your board) is talking about AI, but are they actually building with it?

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I want to hear the questions that are weighing you down the most. Remember, you can submit them anonymously if they are particularly tricky or sensitive.

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We’ve got some great topics. Here’s what’s on tap:

Now, let’s get into it.

IPO man from New York asked:

What are some of your recommendations that can be done today to get the company ready for an IPO or successful M&A exit in the future (maybe in 3-5 years)?

If I am the head of IR and capital markets, how do I go about readying the company internally (keep it confidential to most parties other than senior leadership)?

Thank you for the advice!

Hey IPO Man.

First up, you are unusually far out to be thinking about this. I get this question a lot, but normally from people who are eighteen months away, not three to five years.

The common wisdom is that you cannot start early enough. I do not fully agree. Focus and speed are the most important weapons in any business, and the moment you open up corporate project work around an exit, you introduce drag and distraction. It is a bit like landing a plane. You need to get the landing gear down in time, but deploy it too early, and you compromise the flight.

At three to five years out, the exit should be back of mind for you and the CFO, not a live workstream. You start moving it forward when you are twenty-four to thirty-six months out, and you probably do not engage the broader leadership team until you are inside twenty-four months. So no, I would not be engaging the business at any level yet.

That said, there are things you can be quietly doing right now that will pay significant dividends later, without opening up a formal project or creating premature noise:

Build your long range planning muscle. Use each planning cycle to push your financial model toward the level of detail that will eventually need to answer questions about capital structure, funding, and investor returns. Build that muscle steadily but consistently, rather than having to speedrun it later. Here is a Playbook on building long range planning cycles.

Lock in your seven to twelve core KPIs early. Start building a clean track record against them now. Three-plus years of consistent history on the right metrics is seriously valuable when you get to market. S1s and IMs are littered with convoluted bridges justifying why some KPI should be evaluated at level A rather than the actual reported level B. Adjusted EBITDA versus EBITDA is the classic, but there are many others. That kind of complexity is almost always a symptom of someone who did not start early enough.

Get clear on your metrics now, design your long range plan around them, train the business to understand and manage them, and start socializing them with your key stakeholders. By the time you are in market, those numbers should tell a clean, consistent, unambiguous story rather than looking like metrics you reverse-engineered from a valuation target.

Build investment banking relationships quietly. You need to know the sector leads at the top investment banks before you need them. These relationships take time, and they provide genuine market intelligence. But be careful. Bankers talk. A lot…

I once held a beauty parade with three major advisors, and the rumored sale was in the trade press before I got home that night, with an inbox full of investor relations issues to deal with by the morning. Listen more than you speak at this stage.

If you tell them you are just ‘curious to hear what is going on in the market’ and to ‘build relationships’ they will assume you are planning something. If you tell them you are planning something, they will assume you are about to launch something … it’s how they are wired.

Improve your reporting infrastructure now. Nudge your monthly reporting toward greater transparency and quarterly discipline. Start building bridges at a driver level, training the business to understand its position year on year. If your finance systems cannot support that today, identify the gaps now. With three to five years of runway, there is no excuse not to complete any necessary finance transformation before you are in market and in enough time to yield the transparency benefit.

Get your house in order on governance and controls. A serious IPO or M&A diligence process will go deep on financial controls, revenue recognition policies, related party transactions, and the quality of your audit trail. Start the hard work now, and if there are any gremlins in rev rec or other judgmental accounting areas, now is a good time to solve them.

Clean up your cap table. If you’ve got a messy cap table with legacy options, side letters, or weird share classes, and you have a chance to clean that up through a subsequent round, it’s the perfect opportunity to do that.

Have your auditor ready. Think about which auditor you have and which you need to go to market with. If a Big 4 stamp will be important, then think about when to bring them in, if you haven’t already. One thing to consider is the mandatory partner rotation after five years. You do not want the wildcard of a new audit partner in the year you IPO, so make sure you time this right.

It’s great that you are thinking about this early, but most of the above is about good ordinary finance hygiene/transformation done at a manageable pace.

Thanks for the question.

TLDR: Three to five years out is too early to engage the business. But it is exactly the right time to do the quiet work that makes the loud work easier later.

André from Switzerland asked:

How to read balance sheets/financial statements in less than a minute? I am a consultant and need to quickly understand the financial situation of companies/future clients.

My usual approach is to open the statement of the last financial year and check some of the key figures (for example, cash flow). But instead of guessing wildly, what would be your suggestion to quickly get an overview of the financial health of a client? What are the key points in the balance sheet? Thank you!

André, my dude. You cannot read a balance sheet in less than a minute.

A roomful of browbeaten accountants spent an entire year of their lives preparing those financial statements, and you want to crack through them in sixty seconds?! It’s not a fucking TikTok video…

OK, I’m joking… well, half-joking.

When I need to get up to speed on a business cold, in a short space of time, using only the financial statements, here is what I do and the order I do it in:

1. How does this business make money? Use the segment note or MD&A to understand what the business actually does and how it makes money:

2. What is the working capital position?

3. What is the capital structure?

4. Is the business liquid?

This is your quick distress test, because if the business is in trouble, it overrides everything else.

If you are genuinely good at this, you can get to a decent working answer on most of these questions in fifteen minutes and a solid understanding in an hour.

But there is no real substitute for doing it properly when it matters. Warren Buffett spends his days reading 10-K reports cover to cover, because the most important thing you need to know is propbably buried in a footnote on page 97. There are no shortcuts to that.

TLDR: You cannot read a balance sheet in a minute. But you can triage pretty quickly if you know your way around a set of accounts.

Lord of the Runway from California asked:

I work in finance at a pre-revenue, venture-backed company. After reading your series on scaling the finance function I had an uncomfortable realization: my company is probably in Stage 2: Managed...finance exists, reporting is improving, processes are forming, but the real decision-making still mostly lives in the founder/operator’s head. At least so they think, until it blows up in the form of embarrassment in a board meeting.

This is not a simple domestic SaaS company where finance can just clean up the close and build a forecast. We have multiple entities, "manufacturing" operations, foreign payroll and labor rules, tax/compliance complexity, currency issues, operational spend, vendor controls, and large CapEx decisions that directly affect runway and investor confidence.

My problem: Every time finance starts doing what finance is supposed to do: asking the right questions, challenging assumptions, implementing controls, tying spend to runway, pushing for better forecasting, or asking whether a decision is actually funded, it seems to trigger a territorial reaction from operations/founder leadership.

It rarely comes as a direct “I disagree.” It shows up as side conversations I’m not included in, narrative control, passive-aggressive pushback, delayed alignment, or treating finance like the department of “no” instead of the function trying to prevent the company from driving off a cliff with a beautifully formatted investor deck.

The company has little to no revenue, meaningful CapEx needs, limited runway, international execution risk, and fundraising pressure. So from my seat, finance should be moving the business from founder instinct to disciplined capital allocation. But at times it feels like finance is expected to validate the story, not stress-test the story.

My question: how should a finance leader handle the transition from founder-controlled decision-making to real finance discipline without turning every control, forecast, or CapEx question into a political knife fight? What are the non-negotiables finance should insist on at this stage? And how do you tell the difference between normal Stage 2 growing pains versus a leadership team that says it wants mature finance but actually just wants finance-shaped approval?

Lord of the Runway… thanks for this question.

It sounds like you are doing the right things.

Which begs the uncomfortable question: is the resistance coming from how you are doing them or from a founding team that fundamentally does not want what you are offering?

Multiple entities, international operations, foreign payroll, currency exposure, meaningful CapEx needs, and limited runway just sound like a lot of complexity for a business that doesn’t have any sales. That alone would give me pause about the underlying strategy.

On the founder dynamic: In a cash-flowing or rapidly growing business with demonstrated success, I would tell you to get out of the way and help it go faster. But your business has little to no revenue AND no demonstrated capital discipline. The exec team has not yet earned the right to be blindly trusted with capital allocation.

The harder truth is that this will not change through bottom-up influence alone. Without the founding team's support, you will always be wasting your time.

So, the only question that matters is whether you can change their mind, and that depends on one thing: is the business on track to deliver the promises of its previous raise? If yes, or if they can keep raising regardless, it will be very hard to shift their thinking.

If not, you have something to work with; there is an existential risk on the horizon. Help them see that capital discipline protects their vision. It does not threaten it.

I also assume you have a board. In a venture-backed business, your investors have a direct interest in capital discipline and runway visibility. If the founder is resistant, the board may be a more receptive audience. You do not need to go around the founder, but making sure your reporting to the board is honest, clear, and unvarnished is both your job and your protection. Boards that see the reality tend to create the pressure that founders sometimes need.

There are three things that should be non-negotiable regardless of the politics:

If you have done everything you can and the founder is still driving toward the mountain, self-preservation becomes the right instinct. Find somewhere that actually needs what you have.

TLDR: You are doing the right things. Frame finance as protecting the vision, use the board as an ally on transparency, hold your three non-negotiables, and if nothing moves, ask whether this table is worth sitting at.

A few of the biggest stories that every CFO is paying close attention to. This is the section you might not want to see your name in.

OpenAI prepares to file to go public in coming weeks

We are likely going to see three of the biggest IPOs of all time this year; SpaceX, OpenAI, and Anthropic. SpaceX filed their S1 last week, and the rumors are OpenAI is imminent. God help any company trying to go public after those three have sucked every penny of liquidity out of the market…

‘Megadeals’ boosted credit market in Q1: KPMG

Geopolitical uncertainty? Never heard of it. The show goes on, ladies and gentlemen. CPG had a particularly massive quarter by recent trends.

ECB summons banks to urge them to fix flaws exposed by latest AI models

Anthropics ‘Mythos’ model is currently living rent-free in CISOs’ and regulators’ heads. The model specializes in identifying cyber security weaknesses. Nothing can go wrong there then…

ICYMI, here are some of my favorite finance/business social media posts from this week.

A push back on token spend across early Claude adopters is inevitable. Microsoft have started already:

The big 3 AI IPOs are going to have disciples of Ben Graham crying into their Intelligent Investor textbooks.

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

Last weekend’s Playbook gets into how to fund your working capital cycle.

In last week’s Boardroom Brief we asked: will AI force the Big 4 to change their pricing strategy?

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need