“Many founders only look at their bank account” – CFO expert Alina Nauen on typical finance mistakes

Torq Partners positions itself as a Finance-as-a-Service consultancy for startups and scaleups. The team provides operational support to companies in building their financial organization, from accounting processes and business case modeling to preparing for funding rounds. Alina Nauen, partner at Torq Partners and finance expert, explains in Videocast Pitch & People:

Pitch & People Episodes

PITCH & PEOPLE Episode 25: Alina Nauen

expert Finance

“Many founders only look at their bank account.” Many startup founders keep a close eye on their numbers – but not always the right ones. That’s according to Alina Nauen, partner…

"We help to set up the finance department so that a startup is ready for the next funding round."

The goal: to build a financial structure that inspires investor confidence. This includes reliable key performance indicators, transparent reporting, and clear processes. At the same time, the team also works on the investor side, supporting venture capital funds with the financial due diligence of startups.

This dual perspective provides insights into typical weaknesses of young companies.

When the reporting doesn't match reality

One of the most common mistakes: Founders build their own reporting systems, often based on bank transactions. Alina Nauen adds in our interview:

"But that often has nothing to do with the reality shown in the accounting data."

Many startups primarily focus on their bank transactions and generate reports based on these. However, the connection between operational reporting and actual accounting – for example, through monthly financial statements or accruals – is often missing. This can become critical for investors, especially when a funding round is imminent.

The right time for professional financial structures is often between the seed phase and Series A. This is because, at the latest during Series A due diligence, investors want to see that management reporting matches the accounting data.

Interim CFO (temporary)

In many cases, Nauen himself takes on an operational role within the company – for example, as interim Head of Finance or temporary CFO. This often happens when a startup is about to secure a crucial funding round or when the financial organization needs to be professionalized quickly.

The process typically begins with a so-called Financial Health Check. Your team will first analyze the company's entire financial structure. This includes, among other things, accounting processes, month-end closing, invoicing and payment procedures, and the organizational structure of the finance team. The goal is to identify risks and determine which measures will have the greatest and quickest impact.

In a project with a B2B sustainability startup – then just before its Series A funding round – this analysis revealed, for example, that the existing financial structure was no longer suitable for the company's growth. As a result, the finance management was restructured, and Nauen temporarily took on the role of interim CFO.

In this role, she not only handles strategic issues but also works operationally within the company. This includes leading the finance team, selecting and implementing suitable tools for expense management and invoicing processes, and setting up budgeting and planning processes together with the founders. At the same time, she ensures that key processes—such as the monthly closing of accounts—run significantly faster and in a more structured manner.

An important goal is to ensure that reliable financial figures are available as early in the month as possible, so that founders and investors can make decisions on a sound basis.

Such mandates typically last around six to seven months. During this time, structures are built, processes are improved, and the company is prepared for the next growth phase. In parallel, a permanent internal finance manager is usually sought, to whom responsibility is subsequently transferred. Nauen ensures that knowledge and processes are thoroughly documented to guarantee a smooth transition.

Three finance KPIs every founder should know

Which key performance indicators (KPIs) should founders absolutely keep an eye on? For Nauen, there are three central KPIs that are relevant in practically every startup – regardless of the business model.

Sales volume Revenue is the top priority. However, it's crucial that founders fully understand how this revenue is generated. Especially in the B2B SaaS sector, key performance indicators (KPIs) like ARR or MRR are frequently used. But not every contract automatically generates recurring revenue. For example, if a customer only has a short trial period or a project is only temporary, it's not strictly speaking recurring revenue. Those who calculate this inaccurately can quickly get a distorted picture of their actual growth.

A second key indicator is the Contribution marginIt shows how much of the revenue remains after deducting variable costs. This metric is particularly important because it reveals whether the business model is fundamentally viable. Especially in sectors like e-commerce, the contribution margin helps to understand the minimum prices that must be charged to cover marketing, sales, and other fixed costs.

The third crucial factor is CashFor startups, liquidity is often more important than traditional profitability ratios. Even if a company appears profitable on paper, it can run into trouble if it lacks sufficient liquidity.

Infobox

Alina Nauen is a partner at Torq Partners and, as an interim CFO, supports high-growth startups and scaleups in building professional financial structures. In this role, she works operationally with founding teams, further develops financial processes, and guides companies on their path to funding rounds and sustainable growth. Previously, she held various finance leadership roles in the startup scene, including at Delivery Hero and the climate tech startup Planetly, where she was jointly responsible for building and scaling the finance organization. Today, she brings this experience to young companies at different growth stages. (Photo: Torq Partners)

From hypergrowth to realism

The role of financial management is more important today than ever before. While in 2021 the focus was on growth at any cost and funding rounds were completed at high valuations, the market environment has changed significantly. Investors are paying closer attention to when a startup becomes profitable and how sustainably it grows. The focus is therefore shifting from "growth at all costs" to profitable growth paths.

Nauen also sees significant changes in the German startup ecosystem. While the scene was long heavily concentrated in Berlin, startup activities and investments are increasingly spread across multiple locations.

Munich is gaining in importance in this regard. This is evident not only in the increasing number of startups, but also in the growing density of events, accelerators, and networks that support the ecosystem.

"If you look here Events "You can simply tell that the willingness to exchange ideas and support each other is very high within the ecosystem."

For Torq Partners, this was one of the reasons to take the next step: In addition to its Berlin location, the company has now also opened an office in Munich. This allows the team to work even more closely with the high-growth startups in southern Germany.