Financial blind spots: the key mistakes tech startups make, and how to avoid them

Patrick Murray is a seasoned scaleup CFO at The CFO Centre with deep expertise across technology, life sciences, green tech and AI. Drawing on over 30 years of experience, he shares the most common financial missteps made by early-stage tech startups – and how to steer clear of them.

1. Over-optimistic forecasting

Ambitious entrepreneurs often make over-optimistic forecasters, and my role is often to inject a healthy dose of realism. It’s a delicate balance: presenting an exciting growth narrative while staying grounded in what’s realistically achievable. Aim to build a deliverable budget based on solid assumptions for the first six to nine months, alongside a credible roadmap for the years ahead.

Go granular. Anchor forecasts in data, trends, and pipeline insights. Demonstrate a strong grasp of your sales conversion rates and total addressable market. Incorporate ‘what if?’ stress tests and seek input across departments to ensure a well-rounded view.

Investors appreciate founders who’ve done their homework. Present both a conservative base case and a stretch plan to show you’re prepared for different scenarios – and that you’re not afraid to challenge your own assumptions.

2. Poor cash flow management

“Cash is king” isn’t just a cliché – it’s a lifeline. Yet many startups still underestimate the discipline required to manage it effectively.

When cash is tight, implement a minimum rolling 12-week cash flow forecast. Track secured revenue, committed costs, payroll, taxes, and VAT due dates meticulously. Visibility is everything.

If you're facing a crunch, don’t ignore the problem. Creditors – including HMRC – are far more receptive to communication and negotiation than silence. Present a clear, actionable plan, and you’re more likely to find a resolution.

Staying close to the numbers also empowers founders. You’ll make smarter decisions about spending, hiring, and investing when you have a clear view of your cash position.

3. Underestimating burn rate

Many startups misjudge how quickly they burn through cash, either because revenue lags or costs overrun.

A detailed and realistic financial plan puts you in the driver’s seat. Create a costed timeline aligned to your growth strategy, and make sure your revenue assumptions can support it.

A robust CRM is invaluable, not just for sales forecasting, but also for understanding pipeline velocity, customer behaviours, and revenue concentration risks. If a large proportion of income comes from a few deals, your exposure is higher than you think.

Empowering department heads with their own budgets helps build accountability and visibility across the business. But remember, business forecasting is often more art than science. Use your instincts, but define your key success metrics – and track them rigorously.

4. Neglecting financial planning

Long-term financial planning is essential, not just for growth, but for resilience. Scenario planning should happen well before a downturn, not during one.

Think strategically: what are the major risks and opportunities in the next 12–36 months? What levers could you pull to scale or survive a shock? How might macro trends like regulation, inflation, or tariffs impact your business model?

Many clients benefit from implementing an Entrepreneurial Operating System (EOS) – a structured framework that helps leadership teams align around strategy, priorities and performance metrics. It brings clarity, accountability, and focus.

Regularly review your business plan and carve out time – ideally off-site – for strategic planning with your leadership team. Getting out of the weeds is essential to see the bigger picture.

5. Misaligned incentives with investors

It may seem like a down-the-road issue, but getting misaligned with investors early can create serious friction later, especially around growth strategy, succession planning, or exit timing.

These discussions should happen before you finalise any deal. Align expectations around timelines, returns and success metrics. What does a win look like for both parties?

Use these expectations to set transparent financial goals and incentive structures. Targets should be measurable, achievable, and clearly tied to long-term value creation, not just short-term growth hacks.

Final thoughts

Even the most innovative businesses can stumble without financial discipline. You need more than just a great product or a smart idea – you need the financial rigour to back it up.

Whether you're pre-revenue or preparing for Series B, building strong financial foundations early will give you – and your investors – the confidence to grow not just faster, but smarter.

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