Three reasons:
1. Much of the financial management in a venture company revolves around capital – mostly equity, but sometimes convertible debt. Early on there is typically not a lot to do with income and expenses or the profit and loss statement. Because of that, entrepreneurs tend to ignore the financials until they are a year into the company and have issued multiple series of stock and stock compensation.
2. Most financial work is, or should be, done on forward-looking financial statements and financial models. The first order of business in a start-up is to create a business plan that is supported by financial projections. These are quite often revised as new information is learned or the business changes its priorities or focus. Later, forecasts are necessary to determine how much cash is needed before the next round of funding.
3. Because the company is typically growing fast and changing priorities, so too does the financial management function. It changes when employees are hired. It changes when the board of directors or shareholders need financial statements. It changes when revenue starts occurring. All result in changes to the financial management systems.
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