Essential Cash Management: Investor Relations, Bookkeeping, and Filings
Effective cash management and maintaining a strong governance structure are essential for a fund’s financial stability, regulatory compliance, and long-term success. To ensure smooth operations, focus on three core areas: investor relations, bookkeeping, and staying up to date on filings. An effective investor relations process is critical for building trust with limited partners (LPs), allowing stakeholders to stay informed and aligned with your goals while securing the necessary cash to execute on your fund’s mandate. Bookkeeping, expense tracking, and vendor management provide the financial foundation for daily operations, ensuring accurate records and preparedness for audits. Filing compliance with state and federal entities preserve your legal standing and credibility, helping to mitigate potential liabilities and fines.
Having a clear handle on your cash position facilitates planning for your fund’s activities that include capital calls, distributions, operational expenses, filing fees and taxes. This article will outline the key components of these processes.
1. Investor Relations
Why It Matters:
Investor relations and management of capital calls and funding, ensures that your firm has the necessary liquidity at critical times. This prevents disruptions in operations and allows the fund to capitalize on investment opportunities promptly. Regular and clear communication about capital calls and funding processes keeps investors informed and engaged. Critically, planning the timing of capital calls in advance helps minimize disruptions to investors’ needs while managing your internal rate of return (IRR). Be mindful of the specific goals of your investors and aim to align with their cash management protocols when scheduling capital calls.
Elements May Include:
Manage capital call process
Send capital contribution notices
Track investor payments
Send reminder notices
Reconcile incoming wires
Manage cash distribution process
Prepare distribution calculation by investor
Prepare and send distribution notices to investors
Obtain and maintain investor banking information
Wire cash distributions to investors
Manage investment funding process
Obtain draft documentation and review for pertinent data points
Collect and record underlying portfolio company data
Set up investment funding wire(s) for approval
Obtain executed purchase documentation
Manage stock distribution process
Prepare distribution calculation by investor
Prepare and send distribution notices to investors
Obtain and maintain investor brokerage information
Work with external brokerage firm to facilitate stock distribution process
Maintain investor contact preferences, which can be done within your accountant’s investor portal or proprietary software such as a Customer Relationship Management (CRM) system
Obtain and store formation documentation, including formation certificates, legal agreements, and individual investor subscription agreements
Maintain secure investor portal, including posting limited partnership agreement (LPA), financial statements, capital call history, capital account history, and tax documents
Address investor requests, including audit confirmations, data requests, and other accounting or operations questions
Work with external tax team to understand the implications of realized events, tax distributions, stock distributions, discretionary distributions
CRM Examples:
Affinity
Airtable
HubSpot
Google Sheets
Pipedrive
Dynamo
Investor Portal, Document Sharing, and Data Room Examples:
Anduin
DocSend
iDeals
Intralinks
Notion
ShareVault
Slideshare
WeTransfer
2. Bookkeeping, Expense Tracking, and Vendor Management
Why It Matters:
Management of your books, expenses, and vendor relationships helps streamline operations. By monitoring and managing expenses, you can identify cost-saving opportunities, optimize cash flow, and improve financial performance, allowing you to control costs, track your deductible tax liabilities, and improve profitability. Importantly, a good bookkeeping partner will help you run your operations in a way that will optimize your year-end tax position.
Elements May Include:
Maintain accounting books and records
Manage payment of entity and fund expenses
Organize and process accounts payable and accounts receivable
Know what is tax deductible
Prepare balance sheet, income statement, and detailed general ledger for review monthly
Facilitate credit card expense reporting and cash reimbursement using an expense management system
Administer employee payroll, input benefits deductions, and expense reimbursements (HR, compensation, and benefit selection are typically discretionary)
Manage day-to-day banking relationships, including capital call lines of credit, line of credit drawdowns, payments, and compliance certificates if applicable
Establish connections with experienced vendors, including banking, brokerage, audit, tax, compliance, and insurance providers
Expense Management, Payroll Management, and Task Management Examples:
Gusto
QuickBooks
Asana
Expensify
Trello
Bookkeeper Examples:
Fife Avenue Partners
Greenough Group
Bookkeeper360
Realize CPA
3. State & Federal Business Filings
Why It Matters:
Timely filings maintain your fund’s structure as well as its legal standing, ensuring it remains a recognized and legitimate entity capable of conducting business, entering into contracts, and making investments. Note that state and federal filings can impact tax obligations and benefits as well.
Elements May Include:
State Filings - Examples in California:
Secretary of State Filings:
Articles of Incorporation: For corporations to be legally recognized in California.
Articles of Organization: For forming a limited liability company (LLC).
Statement of Information: An annual or biannual filing that updates the Secretary of State with key information about the business.
Franchise Tax Board (FTB) Filings:
California State Tax Return: Annual tax return for businesses operating in California.
Estimated Tax Payments: Quarterly tax payments based on expected income.
Payroll & Employment Development Department (EDD) Filings:
Employer Registration: Businesses must register with the EDD for state payroll taxes.
Quarterly Payroll Tax Returns: Reporting of wages paid and payroll taxes withheld.
Board of Equalization (BOE) Filings:
Sales and Use Tax Returns: For businesses that sell tangible goods in California.
Federal Filings
Internal Revenue Service (IRS) Filings:
Federal Tax Return: Annual tax return for businesses (e.g., Form 1120 for corporations, Form 1065 for partnerships).
Estimated Tax Payments: Quarterly federal tax payments based on expected income.
Employment Tax Returns: Quarterly reporting of payroll taxes (e.g., Form 941).
Securities and Exchange Commission (SEC) Filings:
Form D: For private placements and securities offerings to comply with Regulation D.
Form ADV: Registration form for investment advisors.
Form PF: For private fund advisors to report information about the private funds they manage.
Financial Crimes Enforcement Network (FinCEN) Filings:
Form 114 (FBAR): Report of Foreign Bank and Financial Accounts for entities with foreign accounts exceeding certain thresholds.
Other Relevant Federal Agencies:
FATCA (Foreign Account Tax Compliance Act) Filings: For entities with foreign financial accounts.
SPV Filings
Similar to the above (to be done for each SPV)
Effective cash management ensures the accuracy of your financial statements while preventing liquidity issues that could disrupt fund activities. By maintaining proper cash flow and business structure, you enable informed decisions regarding contributions, distributions, fees, taxes, and filings. These processes help sustain transparency, investor trust, and audit readiness.
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Sincere appreciation to our contributor Linda Maduwura, founder of Fife Avenue Partners, an accounting, CFO, and back office solution for venture capital and high net worth individuals; written along with Shea Tate-Di Donna and Kaego Ogbechie Rust, authors of The Venture Fund Blueprint.
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Disclaimer: The providers, companies, examples, products, and services shared represent only a subset of available options and are based solely on internal fund manager conversations. These options are intended to be a general framework, not an exhaustive catalog, and should not be viewed as legal or tax advice, endorsements, recommendations, approvals, or rankings. We encourage you to do additional research into each category to find the resources that best fit your specific needs.
