What Most Founders Get Wrong About Their Books – Advice From FlowFi Accounting Expert Erin Dohan
Read 10-year startup accountant, Erin Dohan, thinks you're probably getting wrong with your bookkeeping
FlowFi
In-house writer
Erin Dohan has spent a decade running accounting for venture-backed startups. Along the way, she survived a ruptured brain aneurysm at twenty-seven — an experience she later turned into the memoir I Think I'm Ready to Talk.
Today she’s the co-founder of Stratum Financial Partners. It’s a fractional accounting and CFO firm for fintech, SaaS, and startup founders. She is one of the many fractional experts who help clients through FlowFi.
She sat down with us to talk about the mistakes founders make with their books, where she thinks AI is useful, and how the first month with an accountant should look. Read on to hear her advice to VC-backed founders struggling with finances.
For Founders: Profit Is an Opinion. Cash Is a Fact.
In Erin’s opinion, runway — the number of months of cash left at the current burn rate — is the one metric every founder should always know.
It's easy to misjudge. Say you discount a $300,000 expense to $200,000 but you have to pay up front rather than once a month for a year. You give yourself a pat on the back. You just saved yourself $100,000 in cold hard cash in the bank, right? Wrong.
Let’s say monthly operating expenses are about $200,000 and you normally have about $300,000 in the bank at the end of every month. Next month, you’re going to be short about $100,000 because you decided an immediate discount would be better than a delayed payment.
This is why a company can show a profit on paper while accounts receivable keeps climbing and cash keeps shrinking. It’s a combination that can lead to missed payroll even with a healthy customer base.
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For Founders: What "Clean Books" Actually Means
Erin has a strict definition of what clean accounting looks like:
“You can answer any financial question about your company within about five minutes, without hesitation,” she says. “That's it. Clean isn't about fancy formatting — it's about familiarity. If a founder can't speak to their numbers on the spot, the books aren't clean, no matter how tidy the spreadsheet looks.”
For this reason, Erin believes founders should spend time immersed in their numbers rather than waiting until tax season or a board meeting. Strong founders are comfortable talking through their numbers at any moment because they know they can’t make good decisions without them.
“Try this. Once a month, before anyone asks, sit with three things: what came in, what went out, and what changed since last month. Then ask one question of each surprise: is this a trend or a one-off? That's it. Fifteen minutes turns accounting from a chore you dread into a dashboard you steer by.”
For Founders: You Shouldn’t be Doing Your Books
“Founders always ask me the same thing: when is the right moment to hand off the books? What's the revenue number, the headcount, the funding round where you finally stop doing it yourself?”
“My honest answer surprises them. There isn't one. You were never supposed to be doing them in the first place.”
In Erin’s opinion, the skills that make someone a good founder are much rarer than those of a good bookkeeper. A founder can create a product nobody else can see and sell it before it exists. Or they are really good at convincing engineers and investors to come on board.
Any time that a founder spends pouring over books and not on their strengths is time they could have spent growing the business.
For Accountants: Always Do The First Close Right
For Erin, new accounting relationships center around the first close. How you interact with clients in those first 30 days leading up to the close will decide the entire relationship.
“I'll tell the founder, I can have them up and running in two weeks. Then I get in there and hit a wall. Maybe there hasn't been a compliance checklist done in two years. Maybe the categorization is a mess, and the last person left mid-cleanup,” she says.
“Pretending a larger problem doesn’t exist is how trust dies before it ever starts. So the move is not to disappear and grind in a hole until it's fixed. The move is to say, ‘I found something. Here's what it is. Here's why it pushes the timeline. Here's where I am right now.’"
She also believes all accountants need to focus on two things:
The financials have to be easy to actually read, not a wall of numbers only an accountant can decode.
Accountants have to communicate where they are in the process, especially when it's messy.
“Anyone competent can eventually clean up your books. Very few will tell you the hard thing on day nine instead of hiding it until day ninety.”
For Founders and Accountants: Erin’s Thoughts on AI in Accounting
In Erin’s opinion, AI is great for repetitive accounting tasks but less reliable for explaining why numbers have changed.
Erin says you should use AI without hesitation for tasks like:
Entering transactions
Reconciling your statements
Pulling reports and formatting them
“It's fast, it's consistent, and honestly it's better at this than most humans because it never gets tired or bored. Use it here without hesitation. This gives you your evenings back.”
An example of when not to use AI for accounting
Erin says AI is much worse at explaining why something like your gross margin dipped.
“Did you lose a key customer? Did a cost quietly go up? Was there a big prepaid sitting on your books that's distorting the picture? Those are three completely different problems with three completely different responses, and the number alone points to none of them.”
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