How to answer investor due diligence (the financial checklist)

The moment the request lands

You've had the good call. The term sheet feeling is in the air. And then the email arrives: a list as long as your arm, asking for "the financials," the cap table, your management accounts, the SEIS paperwork, every contract you've ever signed, and — somehow — all of it by Friday.

This is due diligence (the bit where an investor checks that what you told them is actually true). It feels like an exam you didn't revise for. It isn't. It's a request for documents that already exist — or that should already exist — pulled into one tidy place.

The founders who sail through diligence aren't the ones with the best business. They're the ones who can hand over clean numbers on demand. The dread you feel isn't about the deal. It's the worry that your records are a mess and you're about to be found out.

So let's take the mess off the table.

What investors are actually checking

Before the checklist, it helps to know what's going on in their heads. Investors aren't trying to catch you out. They're answering three quiet questions:

Are the numbers true? Does what you said in the pitch match what the bank, the books and Companies House say?

Are there any landmines? Unpaid tax, a co-founder who still owns 20% and left a year ago, a loan nobody mentioned, shares promised twice.

Is this founder on top of it? A founder who can produce current, reconciled numbers in a day is a safe pair of hands. One who takes three weeks and sends a patched-together spreadsheet is a worry — about everything, not just the books.

Get those three right and diligence is a formality. The whole checklist below is just evidence for those three questions.

The financial due diligence checklist

Here's what a UK seed investor will typically ask for. Not every investor wants all of it, and an angel writing £15k will ask for far less than a fund writing £1m. But this is the full menu — tick off what applies.

The books and management accounts. Your profit and loss (money in, money out over a period) and balance sheet (what you own and owe on a date), ideally monthly for the last 12–24 months. This is the spine of the whole pack. If your bookkeeping is current and reconciled (checked against the bank, line by line), these come straight out of your accounting software.

Bank statements. Usually the last 6–12 months. Investors cross-check these against your management accounts. If the two don't agree, that's the conversation you don't want.

The cap table. The list of who owns what slice of the company — founders, employees with options, existing investors, SEIS/EIS shareholders. It must reconcile to your Companies House record and your balance sheet's equity section. (See: What is a cap table?)

Runway and burn. How much cash you have, how fast you're spending it, and how many months that leaves. Investors want to see you know your own numbers — and that the raise gives you a sensible amount of road. (See: How to calculate and explain your burn rate to investors.)

Tax position. VAT returns, PAYE, Corporation Tax — and proof nothing's overdue. Unpaid HMRC liabilities sitting on your balance sheet are a classic red flag, because they're a debt that jumps the queue.

SEIS/EIS paperwork. If you've raised under these schemes, investors want the advance assurance, the compliance statements, and evidence you can issue the SEIS3/EIS3 certificates they need to claim their tax relief. (See: SEIS and EIS explained for founders.)

Companies House filings. Confirmation statement up to date, accounts filed on time, share allotments (SH01 forms) recorded. Late or missing filings suggest a founder who lets admin slip.

Key contracts and the rest. Customer contracts, supplier agreements, your articles of association, any existing shareholder agreements, IP assignments. This is the legal half — but it ties back to the numbers (revenue you've claimed should match signed contracts).

It looks like a lot written down. In practice, most of it is two clean exports and a folder of PDFs — if the underlying records are in order.

The hard way (and why it eats two weeks)

Here's how this usually goes when the books live in a spreadsheet and three years of receipts.

You open your accounting software and realise the last three months aren't reconciled, so the management accounts are wrong. You rebuild them by hand. Your cap table is a tab in a spreadsheet that doesn't match what's at Companies House, so you spend a day reconstructing share issues. You can't find the SEIS3 certificates you were meant to issue, so you email your accountant, who's on holiday. You export a journal, but it's full of "uncategorised" lines you now have to explain.

Two weeks later you send a pack that's almost right, with a covering email apologising for the gaps. Every gap is a follow-up question. Every follow-up question slows the round. And a slow round is a round that can quietly die.

It's not that the work is hard. It's that you're doing it retrospectively, under pressure, from records that were never kept diligence-ready.

How it works in Ledgers

In Ledgers, diligence isn't a scramble — because the work was happening all along.

Your bank feed flows in automatically, transactions are categorised for you, and your books are continuously reconciled with a "Reconciled" badge so you can prove the numbers tie to the bank. Your P&L and balance sheet are always current — no rebuild, no month-end heroics.

When the diligence list lands, you go to DD-ready exports and pull two files: a clean journal export (every transaction, properly categorised, with nothing hidden — the ledger is event-sourced, so nothing disappears) and a cap table CSV that already reconciles to your Companies House record and your equity. Your runway and burn are on screen, current to today. Your SEIS3/EIS3 certificates generate from the same place.

You don't reconstruct anything. You export it.

What you'd actually do

The investor's email arrives on Tuesday. You open Ledgers. You export the journal and the cap table — two clicks. You drop them, plus your last 12 months of management accounts (already there), into the investor folder. You confirm runway and burn off the live figure. You generate any outstanding SEIS3/EIS3 certificates.

By Wednesday lunchtime, you've replied: here's everything, let me know what else you need. You've answered the three quiet questions before they were even asked. And you've sent the one signal that matters most in a raise — this founder runs a tight ship.

Diligence didn't test your business. It just confirmed what your books already showed.

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Ready to stop dreading the diligence email? In Ledgers, your books are continuously reconciled and your investor pack is two clicks away — a clean journal export and a cap table CSV that already tie to your bank and Companies House, with SEIS3/EIS3 certificates generated from the same place. See your numbers without learning accounting → start free.

Mid-raise? Get the rest of the picture: How much runway do you need to raise? → and SEIS and EIS explained for founders →

Want the foundation first? Start with What is a cap table? →

Frequently asked questions

What is a startup due diligence checklist?

It's the list of documents an investor asks for to verify your business before they invest — typically your management accounts, bank statements, cap table, tax position, SEIS/EIS paperwork, Companies House filings and key contracts. The financial half is essentially proof that the numbers you pitched are true.

What financial documents do investors ask for in due diligence?

Most commonly: monthly profit and loss and balance sheet for the last 12–24 months, recent bank statements, a current cap table, your runway and burn, evidence your VAT/PAYE/Corporation Tax are up to date, and SEIS/EIS compliance paperwork.

How long does startup due diligence take?

For a UK seed round, anywhere from a few days to a few weeks. The biggest variable isn't the investor — it's how fast you can produce clean, reconciled numbers. Founders with current books and a tidy cap table can answer in a day or two.

What's the biggest red flag in financial due diligence?

Numbers that don't tie together — management accounts that disagree with the bank, a cap table that doesn't match Companies House, or unpaid tax sitting on the balance sheet. Any of these turns a quick check into a long interrogation.

See your numbers without learning accounting

Ledgers does the bookkeeping — bank feeds, VAT, year-end — and keeps your accountant in the loop. Free for pre-revenue founders.

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