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7 Accounting Mistakes That Can Hurt Your Business Plus Using QBO with Skubana - Recording

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Multichannel retail presents unique challenges when it comes to accounting and reconciliation. Without accurate, real-time data, growth is impossible, and so is accounting.

Andrew Berg, CPA helps online retailers understand the true profitability of their business by combining traditional accounting practices with modern digital approaches. In this webinar, Andrew will be sharing the seven most common accounting errors made by e-commerce operators, and how to avoid them.

After you've learned the mistakes, our Strategic Account Manager, Samantha Potter, will demonstrate how the QBO connector automates and streamlines accounting and reconciliation processes to avoid errors in the future.

Watch the replay right here or read the transcript below:

WBR - QBO Play

 

Transcript

Chad Rubin:

Hello everybody. And welcome to this awesome webinar, Seven Accounting Mistakes That Can Hurt Your Business. We have a really fun bonus at the end that I don't want you to miss. A lot of those that are joining today are Skubana customers. And you're going to benefit greatly from what we're going to share momentarily. So stick around for the end. We have a great panel today. I'm just gonna introduce myself for those that don't know who I am. I'm Chad Rubin, co-founder and CEO of Skubana. Joining me is my colleague Samantha Potter, please introduce yourself.

Samantha Potter:

Hi everybody. So some of you know me already, since I work with a lot of the Skubana accounts. I help businesses with their workflows as they relate to Skubana. So I'll be explaining how the connector works a bit later in this presentation.

Chad Rubin:

Yup. Samantha is a massive help. She's taken on a lot of "elevator-brands" that is high-growth VIP clients at Skubana, and manages a lot of those. And alongside us today, I brought on Andrew Berg, and before Andrew gives his introduction, it's important to understand that Andrew actually does all of my books across the businesses that I own, across my personal taxes, and actually has saved my business from an eCommerce perspective. We'll share more about that later, but Andrew please if you don't mind sharing some of your background as well.

Andrew Berg:

Hi, I'm Andrew Berg. I am calling in from Lafayette Hill, Pennsylvania, which is about five miles outside of Philadelphia. My firm is actually outside of Philadelphia as well in Villanova, Pennsylvania, founded in 2011. I've been a CPA partner of different firms since 1997 in and out of private and public accounting.

I've helped Intuit build the QBO software that most of us are using today. I was part their council to help them make the software better. Berg Advisors works with a lot of eCommerce clients, mostly businesses between $1 million to $20 million in revenue. And Chad is correct, we handle all of Chad's work and we're also the outside CPA firm and accountants for Skubana.

Chad Rubin:

Cool, awesome. So this can be really informative. I want this to be transparent, like a transparent expose on some of the mistakes that I've made with my eCommerce business. For those that don't know before Skubana I was running and automating an eCommerce business called Think Crucial. So without further ado, why don't we get into it? We're going to talk about mistakes that I've made, mistakes that other eCommerce brands have made, and best practices for multichannel e-commerce reconciliation.

A lot of this is geared around eCommerce even though, Andrew Berg does do my software side of things. This is really focused on eCommerce mistakes, for those that want to just see those mistakes and not make those same ones. Samantha is going to talk about what we've launched with our QuickBooks integration and how you can automate a lot of that using the integration that we built.

So why don't we start on the first one? So everyone if you can buckle up. Again, we want you to ask questions, so there is the chat, it's active. I see people from Philadelphia, Michigan, New York, North Carolina, and shout out to, to Philly, which I believe Andrew that's where you, you live or where you're from.

Andrew Berg:

Correct.

Chad Rubin:

All right. So first one is using the wrong accounting method. Actually when you took over Crucial's books, we were using cash basis. And if you can just talk about what you've done there and why people should be using accrual, et cetera.

Andrew Berg:

So everybody has heard this fancy word "accrual" accounting, and everybody knows just cash accounting. Basically those are not ways of doing business, those are ways of accounting for how you did business. So, if you use a credit card, you are running an accrual business. If you ask a vendor to give you a bill for something that you purchased, you're running accrual business. If you collect money from a customer for a service that you're going to provide them in the future, that is accrual. Everything really comes down to how it's recorded in your accounting software, not how you run your business. Most people who start the business start on a cash basis, they start very small, transaction in transaction out, and you're basically recording everything as what you spend when you spent it and when you collected it and not have to worry about when the actual transaction occurred.

So knowing the difference between cash and accrual is extremely important, especially when businesses start to get much bigger, when you're running one SKU versus 50 SKUs or hundreds of SKUs, this process of how you account starts to get a lot more important. Everybody knows especially in a product based business, multichannel eCommerce businesses, cashflow is always a challenge, not having cash, not knowing when to choose to use cash, not knowing strategically when to spend cash. 

So what we do is we take care of all of our clients books on an accrual basis because to us that's the best way for us to determine the true performance of the business. But most of my clients always say, "Hey, I had this profit, where's all my money?" So we developed a "What Happened to the Cash" report. This report takes the accrual-based profit, transitions it to a cash based profit, and then gives us a working tablet to talk to a client about where all their money went, and it reconciles directly to the change in the cash from the beginning of the period to the end of the period.

what happened to my cash report

Andrew Berg:

So the example you see in front of you here basically is showing a detailed example of everything that occurred in that period. And then in the gray box in the bottom is what we share with our clients at a management level, which is, "Hey, let's summarize what happened this period from cash to accrual basis."

Chad Rubin:

What are some of those things that go into the report? By the way, this report is a game changer. I suggest anyone who's on the call today have their accountant, or talk to Berg about how they've generated this report, it's really incredible.

Andrew Berg:

Yeah. So in any business, the three biggest items that create an accrual-based business are accounts receivable, accounts payable and inventory. In an eCommerce business, the biggest item is inventory. It is the biggest challenge that I have working with any eCommerce business is determining what the true valuation of inventory is, knowing when to actually value it, making sure it's closed at a certain period, because that triggers all kinds of conversations about margins in your books, obviously profitability. Items that go into this report are, like I said, inventory, changes to accounts payable and accounts receivable change.

It could be credit card, change, 'cause our credit card balances are paid at different periods than when we actually use the credit card. Deferred revenue is another one that would be an item that would be accrual versus cash as well. So what we do is we extract all those things that hit your P&L that were accrual basis in order to be able to talk about everything on a cash basis instead. We then want to make sure people understand that there's a lot of cash flow items that don't appear on your profit and loss at all. They appear on your balance sheet. So most people lose track of that too. So if you're paying back principal in a longterm debt, that's cashflow out without it appearing on a P&L. If you're paying down accounts payable balances, that's cash out without having affected your profit loss balance, your profit and loss report. So that's why that report that we create is so important to help the owners understand what's going on.

Chad Rubin:

That's great. So the third mistake involves in-limbo inventory. Really it comes down to is what's coming in on the ocean or air, or even in-transit inventory that's going to Amazon's distribution centers.

Andrew Berg:

So one of the big things we see when we talk about valuing inventory, isn't just what the valuation of the inventory that comes from either spreadsheets or in some cases Skubana is managing that inventory valuation. So one of the big pieces that is missing is, what do you do when inventory is in transit? So you put a deposit down on inventory and the inventory is on the water. So that money that is in deposit isn't actually a P&L profit and loss item, it's a balance sheet item for inventory that's on its way, but that inventory isn't valued until it lands in the US and makes its way to your 3PL.

So before that, it sits on as a deposit for the cash that you've put out. Once it arrives, it goes into your inventory, but there are multiple times that inventories in-transit could get 'lost'. Think about it if you transition inventory from your 3PL to Amazon. So your 3PL more than likely will remove it from their inventory once they say it was sent to Amazon, but Amazon won't pick it up until Amazon actually receives it. So there is a report within Amazon that you can use to keep track of that inventory, and then value it properly. Most people would think it's probably not that big, depending on the time of the season, but in many cases  that number is significant, hundreds of thousands of dollars worth of inventory in transit not showing on the books, because it's in transit.

Samantha Potter:

Yeah. Something I'd like to add to that, our inventory value report in the Skubana analytics module actually includes in-transit units. And I know from some of the companies that we work with that Amazon won't necessarily receive product for weeks, sometimes months. So it's just unaccounted for otherwise. So luckily, we have that information, I think it is exactly to your point, what needs to be accounted for.

Andrew Berg:

And that's great Sam, the real question is, somebody has to take that report and then make sure that it makes it onto the client's books. If it doesn't ever make it into the books, I think key here is that you have an accrual based books that's missing potentially a very large number.

Samantha Potter:

Right.

Chad Rubin:

All right, moving on here. Mistake number four, really the 3PL fees of when they've been incurred versus assessed and invoiced. I know that Andrew you've spent a ton of time analyzing that with our 3PL, if you can just talk more about it.

Andrew Berg:

Yeah, sure. Yours and pretty much every other client that we work with. So every 3PL is different. Obviously they use different software to manage their businesses so the first challenge is figuring out how they use their software and connecting it to your existing tools. But I think one of the things that we found is first of all, the 3PL generally has two ways of billing. They will bill you for the month that they are operating in for storage, usually bins that you are going to be taking up for your inventory is billed in the month that it actually occurs. But then when the month ends, they will send you a bill after the month's over for the shipping and the pick-pack and shipping costs associated with orders that went out the door.

That number that is billed in a future month actually is an accrual based item that should be reported on the prior months books so it matches up with the sales that went out the door.

A lot of people will miss that and miss that 3PL invoice. And then the last piece, which Chad will probably be able to jump in and tell you is a lot of times we'll kind of say, "Hey, is your 3PL auditing your inventory?" You know, when I was growing up and I was a little accountant way back when we used to count inventory once a month. That doesn't happen anymore because a lot of times the inventory is with Amazon or 3PL. So we've challenged our 3PLs to go back and say, "Hey, we need to shut down an account and/or a cycle count to verify our inventory value matches what our reports say."

Chad Rubin:

Yeah. And that's something actually we did at Think Crucial. It was painful, and we had an assumption that the inventory was off and it indeed was off. They hadn't done their cycle accounts. I think it was like five years since they had done a cycle account. And so we actually shut down operations and let them, let them do it.

Andrew Berg:

Yep. And then we recorded obsolescence, inventory that didn't exist any longer. It literally came down to a SKU by SKU item count to determine exactly what happened, what occurred within the 3PL. And by the way, the same thing happens with Amazon. And unfortunately none of us can go walk into an Amazon warehouse and audit the inventory.

Chad Rubin:

There are softwares though that can audit and make sure that you're being reimbursed for damage or lost inventory.

If you want an intro to someone who does that, hit me up. It can recover a ton of lost money. My personal email, which you'll get at the end is chad@skubana.com.

The other thing I wanted to point out when we're talking about 3PLs is we initially we're using our 3PLs shipping rates, and one of the things that we did earlier this year was we actually took back our own shipping rates so that we could actually be in control of auditing the shipping rates. That was a big one for us, that was really hurting our profitability because we weren't getting the granularity that we needed to get surgical and understand what's being dimmed out, why are we losing money on this SKU? Is this an oversized item? We made sure we were positioning our inventory across the country where we're minimizing the shipping fees.

Andrew Berg:

Yeah. That's a great point Chad. You know, a lot of people miss that too in the 3PL right? Working with a 3PL that has multiple locations is beneficial because they can move your inventory to the West Coast, and in theory, ship to the West Coast is a lot cheaper than having a 3PL in let's say, New Jersey or Pennsylvania and shipping it all the way to the West Coast.

Chad Rubin:

Yeah. And actually that's a great segue into this screen right here. If you look at the way that the map is divided, this is actually what I've done, I've positioned myself with a 3PL on the East Coast and a 3PL on the West Coast, actually not even the West Coast. I have a 3PL in Mexico, for Section 321 there's a lot of benefits around taxes there. We positioned our inventory after doing an analysis of what percentage of clients are coming from each state, where are we shipping out of and where do we position our items where we're essentially minimizing their shipping fees? And we've been able to save roughly about 30%, which is pretty awesome, you know, especially a low margin commodity business.

United States Fulfillment

Chad Rubin:

Next mistake are not accounting for sales channel fees.

Andrew Berg:

Yeah, I can't imagine how many times I've run into this where I will get a new client and they are recording Amazon sales based on the money that arrived from Amazon in their bank. And you would think that's how people do adjust in the beginning, but actually you will see it, people who are over a million dollars in revenues who might be using bookkeepers, let's say overseas, who don't understand accrual based bookkeeping and accounting are still booking them net cash received. And as most of you probably know, what you're supposed to do is get the reports from Amazon, and in some cases that can be connected directly to your software for the the payouts, gross to net book, all your gross revenues, book all of your net fees to Amazon, returns, refunds so forth and so on, and netting all the way down to the cash that was received.

And not only that, but understanding what period of time that money was for. So if the money comes in, let's say four days into May, but all of that was for sales that occurred in April, that entire amount of sales belongs in April's books, not May's books when the money arrived. Again, another accrual-based item. We actually found, believe it or not, in some cases Amazon will lend money to some eCommerce people as probably some on this call are aware of, and when Amazon takes back payments for their loans, they'll net it right into that exact payout calculation. So if you miss that, you're booking a net item as a sale, you're missing an entire repayment of the loan as well. So you have to know those reports.

Chad Rubin:

Yeah. And let, let's be real. I'm sure you've done this for a lot of other clients. This was a huge mistake that we made at Think Crucial where you recalibrated what we were booking for revenue. First of all, it was happening in the wrong months, but we were booking net revenue. And it's not a true picture of what our true margins - our margin profile. And certainly by the way, if you're looking to even sell a business by booking the wrong revenue just throws off the numbers that you're generating and what that acquisition multiple may look like if you're booking the wrong revenue.

Andrew Berg:

Yeah. And what I'll say is that's a great segue point for a second there. Chad a lot of times I'll say to clients, know your margins, even on an average basis what you think the business margins should be across all of your SKU lines, because when you pull your reports at the end of a month or a quarter or a year, when you close it and you check your margins, if it doesn't make sense compared to what your true margin is, that's a quick indicator that something's wrong with either your inventory valuation or how you're booking sales.

The reason that's really important like Chad said is if you want to go sell your business and say, I do X number of dollars in sales and my margin is Y, you give them your books, and all of a sudden it doesn't say that. Immediately you're going to have a problem with those people trusting the information that you're providing them.

Chad Rubin:

And I think one more doozy to add to it is big risk not filing sales taxes and not doing your sales taxes appropriately on a state level. I know that there's been audits that have happened of companies that were about to be acquired or going through an audit, and suddenly they were like, "Wait a minute. You're not filing sales tax?" And they have all this owed sales tax state by state, which will mess up the entire deal after messing up your books and also the cash in the bank. Now you're stuck with all these payments that needed to be made. I'm sure you've seen that Andrew.

Andrew Berg:

Yeah. You know it's so funny the problem with sales tax is the enforcement's just not in any of the business owners face. If you want to go figure out what's going on, you have to go seek it out, very lightly is it in our face. There are some States like California that are right in our face, and then there are other States that don't even mention to you until it's too late that you had sales tax responsibilities. As most people here know the rules changed in 2018, and now you could be required to file sales tax based on the amount of sales you do in a state, even if you don't have nexus in that state anymore. So we normally suggest if you're over a million dollars to have an audit done by a qualified professional to verify your state  responsibilities.

You have to be careful of what your sales tax platform says is your responsibility. I've seen some of these platforms out there that are,  you know, VC owned, you know, and I look at them and I cringe. Some  make it sound like they're going to be responsible in the case of an audit, but I don't really think they are responsible in many cases despite what it says in their dashboards.

Rules are different in almost every state. And the big key here is Shopify, one of the largest e-commerce platforms requires a manual setup of sales tax which is extremely complicated, and probably one of the reasons why a lot of people don't go through the process. As an example, we actually went through one with a client of ours who was doing a large amount of eCommerce sales, about $30 million a year. And we found that one of the things that were selling was chocolate. And interestingly enough, chocolate is sales taxable in certain States and other States it is not, and it depends on the flour content. So we had to dig down to the state level to determine exactly whether or not this chocolate was taxable and then turn it on in Shopify. That's how complicated it can get.

Samantha Potter:

Hmm. Wow.

Chad Rubin:

The other thing I just want to call attention to outside of sales tax, it's not my favorite topic is just the profitability reports in Skubana. So one of the things that we do is we pull in our 3PL shipping fees into our SKU Profitability report to identify early on which SKUs are making money and what SKUs are losing money. And really just asking the question of why. That's what caused us to take over our own shipping account because we were losing control of that. We wanted to properly route the orders to the right warehouse using our own shipping, by the way, we were getting credit card points on it as well, but we wanted to make sure that we weren't being overcharged.

So there's a little pro-tip that maybe others don't know that are on the call that are Skubana customers.

Andrew Berg:

Mm-hmm (affirmative).

Chad Rubin:

Biggest mistake in my opinion, just in business in general, but specifically around e-commerce merchants is just guessing. And to take the statement from Andrew, "You gotta know it to grow it." I was like, "or you'll blow it".

So, so Andrew, why don't you go through it a little bit for us, what you've seen from a pricing perspective, margin, profit perspective as well.

Andrew Berg:

Yeah. You know, I just do a real quick commercial in my industry, not all accountants are created equal, and it's just the way it is. You know, believe it or not, despite the fact that most accountants will say they can do certain things, there are some that are tax accountants, some are auditors and some are business advisors. What we suggest to do is that you understand the business you're working in, put a plan together to be able to get that client's books to a point where they make sense from the perspective of what they actually think the business is doing. We'd call that a mutual success plan. Once we do that, we restructure the books in a way that the reports are understandable so we can speak to the client about what's going on and then also develop the what happened to the cash report? What that does is it forces us to close the books on a regular basis, either quarterly, and in some cases monthly.

And what that does is we pause, have conversations, discuss what happened, what is happening and what we think will happen so we can reset plans. And I think that all that comes down to in the end with eCommerce based business, 50% to 70% of this always comes down to inventory valuation and gross margins. Almost all of my conversations come back to the same thing. Your profit is X, why is that? Oh, the margin looks wrong. We need to go back and figure out what, what happened with your inventory evaluation. We suggest everybody reconcile and hard-close your books at least monthly if you're doing a million dollars a year, but definitely no less than quarterly. And then pause, review them, figure out if it makes sense and work with the right accountant who can help you understand what the reports mean.

Chad Rubin:

All right, now this is the big one. I think this is a great transition into the QuickBooks connector that we just built. So a lot of individuals on our platform have been doing it manually for a very long time, including myself. And when I say manually, I wasn't doing it, but we had Andrew's team doing it, transferring over data, we were paying by the hour for it, it was baked into our retainer, and we tried using other softwares to help transition data into QuickBooks. And most of them actually, no, all of them had just straight up failed, a lot of them over promised and under delivered, and we started building this ourselves.

Samantha Potter:

Super. Thank you Chad. Yeah. So to introduce all of you to the connector itself, what it is, what it does, why it's useful, why you need it. Here's a brief overview... So Skubana is the hub for all of the warehouses that you're dealing with and all of the sales channels, everything comes together in Skubana. So that's a lot of your data, that's your source of truth in other words. And for most folks, if you're not already using a connector for a different, accounting platform, a lot of the work required is manual.

... and naturally there's room for error. So Andrew I'm sure that you see this all the time with folks you work with. Certain things can be overlooked or forgotten, and there's just a lot of manual effort that's required to remember everything that needs to be done.

Andrew Berg:

Yeah. I'll just jump in here and say, what we do is we close our client's books mostly on a monthly basis, and we pull reports from Skubana in order to record in the accounting software, the inventory valuations at different stages, whether it's in transit or it's inventory that's actually in specific warehouses. So that means that the books of that client are right one day a month, or 12 times a year, the books are right, the rest of the month, they are not accurate because inventory is only updated at the end of the month. So what we've been talking about doing is having a transition where Skubana transfers information directly into the QBO software on an automated basis so that the books can be accurate on at least a daily basis.

Samantha Potter:

Yeah.

Andrew Berg:

And what we're doing right now is doing batch transactions on a daily basis into Chad's Crucial account to automate the inventory valuation updates. So now they are correct daily as opposed to only once a month.

Samantha Potter:

Yeah. And even with that window of one day each month that you're recording the inventory, units are selling. So there's always a little room for error.

Andrew Berg:

And a cool thing to do is have detailed transactions come over from Skubana, detailed all the way to which channel the sale was made on. We typically batch it in daily. The reason I do that is because we usually use Skubana to do the analysis of their businesses. QuickBooks is just a summary platform, and if there was a mistake in any way it will be hard to remove hundreds and/or thousands of transactions. So we really wanna be able to remove one transaction a day, which is the batch transaction. So we're one day.

Samantha Potter:

Yeah. So as Andrew said ultimately this automates the effort of updating your accounting data on a monthly basis, but even sooner than that, you can have the Skubana push data to the connector daily. So what does that mean? The connector is how the data flows. So the connector is integrated with Skubana and QuickBooks. The connector records any event that occurs in Skubana. So you see here order, data, anything related to purchases, inventory, your fees, that triggers something to occur in Skubana. All of that data then flows to the connector, GothamWorks. Within the connector, you have your configured settings. So all of the data will be formatted in the way that you need it, and will be pushed to QuickBooks in the cadence that you need. The format related to the dates, the way that you date, journal entries or whatever type of entry you use, and all that data will be sent to the specific accounts that you need specific pieces of data to flow to.

Andrew Berg:

Unlike a lot of exsting apps that you might find in an Intuit or QuickBooks App store GothamWorks is actually the piece where you're going to actually make your notations, where it's going to connect to Skubana information, or, designations with the QBO designations, it'll match up certain things and then flow into QBO. So you're actually not using a app that's built into Skubana, we're using a bridge connector from Skubana.

Samantha Potter:

Right.

Andrew Berg:

... which translates the information between the two softwares.

Samantha Potter:

Yeah. That's a good distinction.

So the, the connector itself is on its own server. So that data is held separately, as a bridge, as Andrew said. So it's not something that would be visible in your Skubana account, but it's all the same data that is in your Skubana account flowing over. Once the data enters the connector and is configured according to your settings, it enters these specific accounts. That begs the question, why do you need this connector? What, what would this do for your, for your team? How would this save you time? Ultimately it's removing all the manual efforts that your team is contributing toward anything financial or accounting related.:

The process of setting up the connector is actually pretty quick. We have our whole customer success team dedicated to implementing the connector for anyone who's ready to take it on. With Skubana, you'd have a designated implementation manager for this process and that specialist would then set up the accounts with you and all the mappings.

Samantha Potter:

So here in this screenshot you can see this is the connector and you can see how for each sales channel you have different accounts mapped and you can determine on a very granular basis how you want the data fed into QuickBooks from Skubana.

Andrew Berg:

Hey Sam, can I interrupt here for a second? Um, so one of the things I think is important here as a distinction is, since I'm an accountant and I have clean books, my concern here is, what happens if I connect this thing and all of a sudden I don't have clean books any longer? And a lot of outside accountants will feel that way, and a lot of CFOs and comptrollers are gonna feel that way. I highly suggest an accountant be involved when this connection is made, because there are considerations here such as, what about cash as it relates to sales, and will it pick up the cash that is going to come in with my connection to QBO, for example, that I already have my Shopify connected, and my cash comes in that way, or maybe it's going to come in 'cause I'm going to have my bank connected.

So there's a lot of considerations here that have to be decided about what you want to have come over. So it can be as like Sam said, you could just do inventory valuation, but probably you want costs of goods sold. You may or may not want sales, 'cause you might have sales coming from a different location, but you might want it and then turn off the other location. Cash is also another consideration too. So you have to be sure an accountant is involved when you're working on this connection to make sure it works right.

Samantha Potter:

That's a great point. I know that at Skubana we have companies of every shape and color and certain companies are handling books themselves internally and may not be working directly with an accountant, but with a connector like this, it really levels you up in terms of the capabilities of manipulating your data in a more granular way than you typically would if you were just starting out with QBO handling it on your own. So that's a really great point. And as you mentioned before, you have, if, if folks want to comment in the chat box, we can connect you with, um, accountants or anyone else that you would need to help you handle and guide them further.

So another great point that you made was that, with the connector, you can control exactly what data is pushed and also block data that you don't want pushed. So for example, we do have some customers who only want to send specific types of data, like only one specific sales channel use to push data to QuickBooks or cost of goods sold alone, for example. So in terms of the configuration abilities really you can handle all your data and manipulate the the transfer of it in any way that you'd like.

There are granular settings by warehouse sales channel, et cetera. So on every level, everything is configurable.

Naturally every workflow is different. So Andrew, you could speak to this. Every company has different accounting needs. If you're working with international taxes for example... and want to block those.

Andrew Berg:

Yeah. What we did is when we connected Crucial, Chad's company's books to Skubana is we decided we didn't want to make changes to any of the existing categories that we really knew were correct and we were using in the old manual method. So what we did is we created new categories that we knew were specifically related to this connection and set up, set up what I would call dummy accounts. And we had the information flow into those dummy accounts, and we A/B tested throughout this process on a daily basis, until we could see the balance, get to a point where it was going to match with the Skubana reports, but we never allowed it to hit the manual information that we knew was accurate from the prior months close, because I was afraid that we would have to go back and clean it up. And worst case scenario in this situation is we would just delete the accounts or inactivate the accounts that we set up.

Samantha Potter:

With, um, some of the demos I've given on the connector, I know that some customers want to import historical data from Skubana, and others want to just start fresh, as you mentioned, just starting from this point forward, keeping last month's books closed. So that is a really good question for the accountant or whoever is going to do your finances.

Andrew Berg:

And just real quickly Sam, again, this is not a commercial. I just wanna make sure it's clear, if your accountant doesn't know, you need to go talk, find somebody who does know, it's extremely important. Skubana pushes your data onto the bridge, it's really our responsibility  (as accountants) to make sure that we know where we want that bridge to go. And a lot of that really comes down to having an accountant understanding the books and knowing what to do with it. So make sure you're working with somebody who knows what they're doing.

Samantha Potter:

So in terms of the ways that the, the connector will allow you to record data, um, this is also configurable and Andrew touched on this before. The connector can support transactional and batched receipts, journal entries, et cetera. So as he was explaining, if you wanna explain some more, the batched method can be a little safer or cleaner in terms of backtracking and verifying past data.

Andrew Berg:

Yeah, it's probably a pet peeve of mine, but I was dead-set against having any detailed transactions go into the file. We actually were a user of the first bridge that Skubana set up way back when, I think it was about three years ago, and as Chad said, it was a really big mess. And I will not, will not forget the look on the face that my bookkeeper gave me when she saw what happened to the books after we set it up and I'll never let that happen again. So we allow detailed transactions to go in, it was for somebody who was doing about 500 to a thousand transactions a day, and it was a big problem.

Andrew Berg:

So I'm a big believer in batch transactions, and then the ability to go back and find out what was in the batch within the bridge or software, and that way I can just delete or change the batch in QBO very easily. So we like the one day, one time a day batch roll up of transactions putting it into QBO as one transaction, I should say one transaction, once a day. It could be multiple transactions, but once a day for batching.

Samantha Potter:

And as you can see in the screenshot, um, for the tracking interval that can be adjusted hourly, daily, weekly, so daily is possible, hourly, um, for good accountability.

Samantha Potter:

So in terms of the automatic sync or automatic push, naturally we all know with Skubana Orderbots and other functionality is that a lot of Skubana's help in terms of your day-to-day is automating low value tasks that you shouldn't have to deal with manually, such as splitting orders, merging orders, routing your orders to the correct warehouse, and ensuring that all lowers your overhead. So the purpose of this connector is to do the same thing, to streamline your operations, streamline the process of closing your books every month and to have everything done automatically and alleviate the manual effort. So your sales orders, purchase order information, channel fees, et cetera. Even if some of these items don't necessarily apply to your specific workflow everything is, and can be accounted for. So there's really no area left, left untouched.

Andrew Berg:

And I think it's probably everybody is opinion, it's kind of like getting a brand new iPhone, right? You turn everything on on the phone and then you try and figure out how to use it. This is one of those scenarios where it's a little scary to do that. Again, it's probably because I'm an accountant at heart and I feel like making sure it's right is more important than all the features being turned on. I like to turn them on one at a time. So I'm like, "All right, that works great. Now let's move on and let's break out all the sales by channel. Great, that works. Now let's turn on this feature." And what that basically does is a rolling turn on, to make sure it works because if you turn them on at once, it might be hard to know what was going wrong if it's not working. So I'm not a big fan of that.

Samantha Potter:

I think that's a great method, step-by-step. I think that that's a great way to start turning everything on. In terms of the pieces of data, we briefly touched on this before, but to get a little more specific, these are the data types that Skubana is pushing over to QuickBooks, or can push over to QuickBooks. Um, we have a very detailed document on all of the technical specs of the connector. So this is a very abbreviated version, but just to give an overview of the type of data that exists and what will trigger it to be pushed to QBO.

Samantha Potter:

So self-explanatory, if a return is created, then that information is then pushed to the connector, which pushes to QuickBooks. So any event that occurs can then be pushed to QuickBooks to create the proper entries. If anyone has questions about this slide also, please feel free to ask. There's a lot more to be explained in terms of the data that can be pushed and how we push it. So, we'd be happy to send you the technical specs later as well.

Samantha Potter:

Awesome. So to recap, what's the point of all this? Why automate this? Why look further into the way that you're handling your accounting and your books?

Andrew Berg:

Yeah, of course. So as I mentioned before, we're big on reconciling and closing books monthly and/or quarterly, and especially on an accrual basis. The reason why is we want to be able to pause, understand what happened, what is happening and what will happen in order to discuss with the client some strategy about whether or not we should go take on that new marketing opportunity, or maybe we should hire somebody or maybe even pay myself more money. We want the largest item to be accurate, as accurate as possible, as often as possible. And in an e-commerce multichannel business that is inventory, which is why inventory connection on an automated basis makes so much sense. And if it's connected and automated and your books can be accurate throughout the month, then you can sit down and pause at any point in time, instead of just at the end of the month when you close.

In any cases, this is all about being able to grow it and know it in order not to blow it like Chad said.That is to be able to make the right strategic decisions based on the right information. And the only way to know for sure if it's correct is being accrual based accounting and closing on a regular basis.

Samantha Potter:

That's a great point. A really important note to add, which is another huge step in the accounting realm on Skubana is, and so most of our customers know about this new feature already because it's been on the platform, and I know that most of the customers that I work with are already using it. Our multichannel reconciliation tool, not to be confused with general reconciling your books and your sales data, but the reconciliation of your inventory, that new feature in the inventory module was made specifically for accounting purposes to help all of our customers control their inventory value.

So naturally when you receive on a PO your inventory value is created with your landed cost, but anyone has to add errant units manually for whatever reason, there's a million use cases.

So anytime units are adjusted in your inventory, you may not have an inventory value attached, but now with this tool you're able to control that value to control your cogs.

Samantha Potter:

And that's something that I think is important to keep up on, more frequently than monthly even depending on how often you're receiving inventory or adjusting.

Samantha Potter:

So with that too, just another Skubana tool that we've rolled out recently that  to your point data is king and you have to keep everything as clean as possible so that you can fully rely on it.

Andrew Berg:

Yeah, let's be real. I'd already mentioned that I was part of the QBO software building back fou- four, three, five years ago. And the number one item that was discussed that long ago was when was QBO going to get inventory up and running and they never did it. It's never worked, it's an awful program and everybody knows it. The reality of the situation there's probably nobody on this call that doesn't agree that inventory should be attached to their QBO and attached to their QBL or software on a regular basis. The big concern in here is, is it going to work? And that has to happen and should happen because it's been discussed ad-nauseam for at least five plus years. And this is something my industry has been waiting and begging for, for a long time.

Samantha Potter:

Yeah. The limitation I am familiar with is primarily, ne is that the inventory is controlled only, or inventory can only be tracked if it's a single warehouse.

Andrew Berg:

Mm-hmm (affirmative).

Samantha Potter:

... if you have multiple locations, you're at a complete loss.

Andrew Berg:

Yup. Exactly.

Samantha Potter:

All right. So to recap, Andrew take it away.

Andrew Berg:

Yeah. So you want to know cash versus accrual, cash in the early stages of business, and then move to accrual, I suggest by a million dollars in gross revenues you should do it on accrual basis. I normally put all my clients on accrual basis day one, and a lot of them think it's painful, but I like it because I can then tell them on a performance basis exactly what's going on in their business. So cash versus accrual, extremely important, don't lose track of your cash. So being able to record where your inventory is, and that goes on with two and three, go together, recording you're in transit inventory, recording your inventory evaluation at the right points, making sure that your books are accrual basis will help you understand where your cash is and be able to then help you understand and make the right strategic decisions.

As I mentioned, I do a report called What Happened to the Cash, which helps reconcile recording to cash. I think, I think it's a helpful tool to bridge the gap for our clients. Don't forget 3PL costs vary, not only is it when they bill you but where they're located in the country could be a big issue, for their shipping costs. Don't forget that 3PLs can audit your accounts. They probably will say they cannot, but understanding whether or not your valuation is right or not is important. I suggest asking the cycle count, if not, at least shut down and count once a year. Understanding your margin, extremely important. It is the number one thing that I hear when I talk about my clients' books, when we have a closed period is my margin is X, I thought it was Y, why is it wrong?

And, understanding your margin and knowing what you think your margin in your business is going to be is really important. For example, I have a client that I know knows for example that his margins used to be around between 20% and 24%. So when the margin is in that range, we're good. But imagine pulling a report and finding a margin that shows all of a sudden seven or the other way, 40, we know something's wrong. Don't play the guessing games, that means close your books monthly and/or quarterly, and then use that to help you make the right strategic decisions. Manual data entry, obviously this is all about the, the connector, the Skubana QBO connector, which we think helps automate the process and certainly helps you have your books accurate on a more regular basis than monthly or quarterly.

And again, I want to stick to that point, right? Anybody who closes their books once a year to give to their accountant, and their accountant doesn't do anything, but accept their books, that means the books could be completely wrong. If the accountant actually does work, that means it's right, once a year. If you do it quarterly, they're right four times a year, if they do it every month, they're only right 12 times a year. If you connect things automatically and start to reconcile and put all your transactions in daily, it can be right every day of the year, which obviously is really important for a growing business. And then the last one, Sam, you can go ahead and obviously take that away about the connector.

Samantha Potter:

Yeah. So ultimately the more, the more processes are automated, the less room there is for human error. Plus that gives you so much of your own time back and your teams so to work on other projects. So ultimately the con- the connector not only ensures accuracy, but it also ensures that you have more time for the things that actually matter. And that coupled with the reconciliation tool for inventory, just further solidifies the fact that everything can be handled, by computers and this, this connector will streamline everything in the way that or- originally I think everybody hoped it would be for accounting.

Andrew Berg:

And work with an accountant that knows what they're doing.

 

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