Is Your Bookkeeper Holding Back Your Growth?
So, you’ve got a bookkeeper and she is reconciling your QuickBooks every month so you can analyze monthly financials. This is great, right?
Maybe not.
Every time you look are your financials, the numbers feel off. You’re not exactly sure why, but you know that something isn’t right.
Why is this happening?
Chances are it’s because your bookkeeper, while great at what she does, is not skilled in doing the books for growing DTC consumer brands.
The result?
Your books are wrong every month, and the lack of accurate financial information is holding back your ability to make scaling decisions with confidence.
Here’s the thing –
Growing DTC consumer brands have specific accounting nuances that your bookkeeper must understand at a deep level if you want useful financials.
Unfortunately, your current bookkeeper doesn’t understand these nuances and it is holding back your brand’s growth.
But don’t worry. I’ve got you!
Today I’m going to walk you through 3 key areas that your bookkeeper must understand at a deep level to create the financials you need to scale. By arming you with this knowledge, you’ll be able to discern if your current bookkeeper can support your brand’s growth.
Let’s dive in!
Your Bookkeeper Must Understand Ecommerce Platforms
It is critical that your bookkeeper understands how to navigate and reconcile the financial and order data contained within the most common Ecommerce platforms, like Shopify and Amazon Seller Central.
And unfortunately – most do not.
One of the most common drivers of inaccurate Ecommerce bookkeeping is caused by the fact that the bookkeeper does not understand how to export, record, and reconcile the data in Shopify and Amazon Seller Central.
Why? Because it is unlike any other data they typically see.
The danger here is this – when your bookkeeper doesn’t understand where the data lives and what the data means, they run a huge risk of inaccurately recording how the transactions impact your general ledger, and ultimately your financials.
The result for you is inaccurate revenue, cash and margin data, which means a huge risk of making bad decisions!
When your bookkeeper understands how to work with Shopify and Amazon Seller Central data, they’re able to quickly and accurately record revenue, costs and cash deposits in the correct months.
The result for you is accurate revenue, cash flow and margin data, which means higher quality scaling decisions!
Your Bookkeeper Must Understand Accrual Inventory Accounting
The second thing your bookkeeper must understand at a deep level is how to accurately record your inventory and Cost of Goods Sold (COGS) on an accrual basis.
Most brands I encounter have inaccurate, cash basis inventory accounting when they should be recording inventory and COGS on an accrual basis.
Why does accrual basis inventory and COGS accounting matter?
In simple terms, cash basis records your COGS in the month the inventory was purchased while accrual basis records COGS in the month the inventory was sold.
Why does this distinction matter?
Cash basis inventory accounting records your COGS in a different month than the revenue associated with that cost.
The result?
You have no idea what your monthly margins are because COGS and revenues are recorded in different months. This is bad news for decision making, because you never know whether your monthly margins are getting better or worse.
The solution?
Work with a bookkeeper who understand how to record COGS on an accrual basis, meaning your inventory cost hits the P&L in the same month that the associated revenue does.
This allows you to get a true read on your monthly margins, allowing you the visibility to quickly understand if they are getting better and worse.
The result? You can intervene on monthly margin changes with swift management action.
Your Bookkeeper Must Understand Accrual Balance Sheet Accounting
The third area that your bookkeeper must understand is accrual balance sheet accounting.
Given that you’re a brand founder and not an accountant, I’m not going to get into the technical aspects of accrual balance sheet accounting.
What’s important to understand here is that many bookkeepers do not understand how to prepare an accrual basis balance sheet.
Here’s the risk for you in this –
Without an accurate accrual basis balance sheet, you can’t get a read on what is driving your cash conversion cycle.
Your cash conversion cycle helps you understand how your receivables, inventory and payables are impacting your cash flow.
Understanding and managing your cash conversion cycle is critical to successfully scaling a growing DTC brand, and you can’t do so without an accrual basis balance sheet.
Summary
In summary, not all bookkeepers are created equal.
Finding one who understands the nuances of a growing DTC consumer brand will result in the accurate financials that you need to make scaling decisions with confidence.
Remember, when discerning whether a bookkeeper is a fit for your growing DTC brand, assess how well they understand the following areas at a deep level:
Common Ecommerce platform data
Accrual inventory and COGs accounting
Accrual balance sheet accounting
If you follow the advice in this article, you’ll be able to quickly and easily select the optimal bookkeeper for your business. The result will be timely and accurate financials that are truly insightful and helpful for making scaling decisions.
If you want any help looking for an Ecommerce accounting stud, feel free to reply to this email. I’m happy to help.
Until next time, scale on!
