Backdating the books
A2X, bookskeep, and accrual accounting
bookskeep is a US-based bookkeeping firm that specialises in ecommerce businesses. They’ve been around since 2014, and have been an A2X partner since 2017. bookskeep has a high number of clients using QuickBooks Online, although they’re seeing an increasing number of Xero users too.
Recently, the bookskeep team helped a client who needed to rebuild their financial records in order to sell their business - and they realised the true value of A2X.
CEO and Founder Cyndi Thomason explains: “The client had been in business several years. They asked us to build a set of books that would allow them to present their business to potential buyers. The client had no financial books at all. Honestly, trying to go that far back would have been daunting. Knowing that we could rely on A2X to build the income portion of it, we felt that we could make it work for them.”
Rebuilding business records
The client was running a successful ecommerce business, selling durable goods on Amazon. A business broker who was helping them get the business ready to sell introduced bookskeep to the client. One of the broker’s requirements was accrual-based financial records - which the client didn’t have.
Despite being in business for a significant period, the client had only cash-based records. While cash-based books can work for some businesses, accrual accounting gives far more insight, allowing the business to compare data month by month, and year by year.
Building a set of books using accrual accounting meant going back through several years of data to reconstruct the records. Because the client had been selling in North America and various foreign markets during that time, this was not a simple process. Fortunately, the client was very happy to use A2X and the bookskeep team was able to access five years of accurate, postdated records almost instantly.
“The broker wanted the books in accrual method, so being able to tap into the way A2X presents that data month by month, being able to pull that over efficiently saved us tons of time. Also, when you’re doing it manually, you have potential for error.”
Complications and constraints
Like many Amazon sellers, the client had relatively basic financial records. Although the owner was able to run a successful business, there was limited knowledge of accounting processes, which meant the bookskeep team faced an in-depth search for information.
Cyndi says that the client “had little idea what their numbers were, no data around their product costs. They had price lists but never got invoices, so it was a lot of reconstruction.”
Another complication was the quick turnaround time. The client wanted to sell the business early in 2018, but only approached bookskeep in late 2017. With the holiday season approaching, the team didn’t have a lot of time.
Accurate and accessible
One major benefit of using A2X to rebuild the client’s books was the ability to backdate records in multiple currencies. Because the client sold goods in a number of different countries, this made a huge difference to the bookskeep team.
Cyndi explains that the broker and client had been working with Excel templates to work out multiple currencies, but that the data wasn’t dynamic or accurate to the time period. A2X automatically converted the currency data to the relevant time period, which meant the new records - even from five years ago - were accurate.
The difficult part was rebuilding the records that weren’t available through A2X - bank data, expenses, and product costing. Combing through the bank records and product costs manually was a particular challenge.
“The A2X part was easy - if all of it could have been automated, that would have been easier. Historic bank data was difficult. It would have been good if they had product-costing information, if they’d been using the product-cost portion of A2X - that was difficult to reconstruct.”
Getting the job done
The client ended up with a full set of accrual-based books - but, as Cyndi explains, it would have been even easier if the client had kept in-depth records and worked with a qualified accountant from the start.
“Many times the concern is, when we start working with ecommerce businesses, they’re not really equipped to manage the cash flow side of the business.”
Working with an accountant and keeping accurate records would have given the client a clearer picture of the business as it was growing, and they wouldn’t have needed to rebuild the books when they decided to sell.
Despite some complications, the job was done in time, and the business is now in the process of being sold.
Cyndi credits A2X with making the job much quicker and easier than it could have been:
“They had a lot going on. But knowing that we could rely on A2X to build a portion of it, we felt that we could make it work. So we quoted the work, did it, and now it’s for sale.”