Claus Lauter [00:00:00]:
Welcome to the e commerce Coffee Break podcast. Today we revisit the episode with Nathan Hirsch, founder and CEO of Ecom Balance, and we discuss how to say goodbye to your bookkeeping hassles. So let's dive right into it.
Voice over [00:00:14]:
This is the e commerce Coffee Break, a top rated Shopify growth podcast dedicated to Shopify merchants and business owners looking to grow their online stores. Learn how to survive in the fast changing e commerce world with your host, Klaus Lauter, and get marketing advice you can't find on Google. Welcome. Welcome to the show.
Claus Lauter [00:00:40]:
Welcome to another episode of e commerce Coffee Break podcast. Today we want to talk about a crucial factor in every business. Some people like it, some don't. It's bookkeeping and accounting. So bookkeeping obviously a very important factor because you need to know your numbers, not only for tax reasons, but also to maintain a good business. That's what we want to dive into today a little bit deeper. And guest on the show today is somebody who is in the ecommerce space for a very long time. He knows his way around.
Claus Lauter [00:01:04]:
It's Nathan Hirsch. He is a lifelong entrepreneur. We started selling textbooks on Amazon in college. He has built a team of virtual assistants that helped him sell over 25 million in baby products. And eventually he founded Free Up, a successful freelance virtual assistant marketplace. After being acquired by Davoot, he launched Ecommerce Balance and Accountbalance.com. That's what we're talking about today, and we want to dive right into it. Hi Nathan.
Claus Lauter [00:01:28]:
How are you today?
Nathan Hirsch [00:01:29]:
I am great. How are you?
Claus Lauter [00:01:31]:
I'm good, Nathan. Bookkeeping, not everyone likes it. I mentioned that. But it's important. So let's talk about why merchants need to be really focused on having the right bookkeeper. What brought you to the topic of offering a service from merchants?
Nathan Hirsch [00:01:47]:
Yeah, so I tend to focus on the unsexy parts of business. So hiring and bookkeeping, my first Amazon business that I started in 2008, I went through every bookkeeping mistake imaginable. At first, I tried doing it myself and I was sucking up all my time doing bookkeeping every month. And then I had to pay someone else to redo all my work because I didn't know what I was doing and they had to redo it correctly. Then I tried to just dump it on my account at the end of every year, and it led to every tax season being really stressful and me not being able to make decisions every month. Then I tried hiring a quarterly bookkeeper, and same issue. I just couldn't make decisions in real time. And then finally I realized that I needed a bookkeeper every single month.
Nathan Hirsch [00:02:32]:
Now, with my next company free up, I hired a bookkeeper from day one. And that was one of the best decisions I ever made. Because even before we were profitable, every month we'd look at the numbers, we'd have a monthly finance meeting, and we'd make decisions based on what the numbers were telling us. Now, there were other benefits to monthly books, like tax season was less stressful. And other businesses, although we never did this, you could get investing or funding if you have clean books. But really, that monthly decision making was key. Now, four years later, when we sold free up, we had four years of immaculate books going back from day one. And that helped us pass due diligence.
Nathan Hirsch [00:03:14]:
Now, a lot of people again won't sell their company, but the main reason to do bookkeeping every month is for decision making. You want to be able to make good decisions every single month. Not by guessing or your gut, not by the money deposited in your bank account, but what the actual numbers in your books tell you. And the good news is, you don't need to learn bookkeeping. You don't need to take a course on bookkeeping. You shouldn't be spending time doing your own books. It's a bad use of your time. But you do need to have a good monthly bookkeeping process that gets you your books on time every single month.
Nathan Hirsch [00:03:48]:
That helps you make decisions.
Claus Lauter [00:03:49]:
No, 100% agree. I like that you mentioned you made every mistake at the beginning. I can totally rely that. I did my first startup in 2001, and we went to a couple of bookkeepers. Biggest problem there, they didn't know what we do. Ecommerce is a very specific business. If you're going to your mama and papa brick and mortar bookkeeper, you probably will not understand what you do. If you go to a huge company, you're probably, as a small business, also not very well suited there.
Claus Lauter [00:04:15]:
So what do you see from your side? What are the biggest mistakes merchants do when picking a bookkeeper in the first place?
Nathan Hirsch [00:04:22]:
I mean, if you're an ecommerce seller, you need to use a bookkeeper that knows ecommerce. That means they have to understand the marketplaces returns, refund fees, stuff like that. And they have to be able to use the connecting tools, like we use a two x. There's a few other ones, like link my books. You can't just know Quickbooks. You have to actually understand the marketplaces and their fees. Now, in addition to that, there's inventory, there's cost of goods sold. Usually you need a bookkeeper that understands not just cash based accounting, but accrual based, where the inventory you buy and that the sales all occur in the month, that they actually happen, not just when they hit your credit card and your bank account.
Nathan Hirsch [00:05:02]:
So if you're out there and you're looking for a bookkeeper and you're an ecommerce business, make sure you look for an ecommerce bookkeeper that understands accrual bookkeeping and that has a lot of experiences with the different marketplaces.
Claus Lauter [00:05:15]:
100% agreed. As a merchants, obviously you want to get not only a night of sleep when it comes to the tax season, knowing that everything is done the right way. You also want to have your monthly reports. What numbers, as a merchants, do I need to look into, or what do I need to request from my bookkeeper to make good decisions?
Nathan Hirsch [00:05:36]:
So you should be getting three reports every single month. Income statement, balance sheet, and cash flow statement. So the income statement shows you how much you actually make. Profit or income minus expenses equals profit. The balance sheet shows you how healthy your business is. So assets versus its liabilities. You can see your inventory, your overhead, any loans or debt that you have there. And then cash flow is how much cash you actually have.
Nathan Hirsch [00:06:02]:
And especially if you're a seasonal business or you make most of your sales in that fourth quarter, like a lot of ecommerce sellers, do you want to make sure that you're not running out of cash during your slow times and you can afford your people and all of that? So those are the three statements that you should be looking at every single month. And if you go to econbalance.com agenda, you can actually grab our monthly finance meeting where every single month we go through these reports together, and that's where we make decisions. Should we hire more people? Should we cut back on this software? Should we launch in another marketplace? The decision should be made during your monthly finance meeting. And during the monthly finance meeting, you should be going through those three reports.
Claus Lauter [00:06:44]:
Okay? Now, if you don't have a CFO, a financial officer in your business, you're a small startup or a small medium enterprise, and you, as a business owner, do these numbers on your own. You have to look at it. Do I get any support from your side to really understand the numbers and what I need to decide on?
Nathan Hirsch [00:07:02]:
I mean, we make the reports really easy to read. We use a tool called fathom that makes them nice and neat. We also make the chart of accounts very easily broken down so you know what the fees are, you know how your expenses are broken down. And we were happy to do a call once we catch up your books to kind of go through it with you as well. I mean, there's lots of great resources on reading those three reports, but the best way to really understand the numbers of your business and get good at reading these reports is to just go through them every single month, ask questions, get to know your numbers. When we sold free up in that original phone call, they asked us different things about our numbers, and we knew those numbers inside and out because we had gone through them every single month. And later on, when they actually got into our books, then they built a lot of trust because the numbers in the books matched exactly what we were talking about on the phone call. So make sure you understand your numbers and those reports.
Nathan Hirsch [00:07:59]:
But the best way to do it is by just going through it every month, and it's going to help you in other stuff as well. If you invest in the stock market, income statement, balance sheet, cash flow, if you're going to invest in other businesses, same thing. So the sooner you learn how to read those reports, the better.
Claus Lauter [00:08:14]:
Collecting receipts, having everything prepared for the bookkeeping service, how should a merchants deal with that? I'm particularly bad when it comes to collecting receipts. So what's your best advice there?
Nathan Hirsch [00:08:27]:
This is what I do, and it's very makeshift, but it works really well. So first of all, your bookkeepers don't need your receipts. You need your receipts. Well, this depends on where you live. I can only speak for the US, but in the US, bookkeepers don't need your receipts. They do need view only access to your banks, your credit cards, stuff like that. And they can pull all the information from there. You need to keep all of your receipts in case you ever got audited by the IRS.
Nathan Hirsch [00:08:51]:
Hopefully you never do. But if you do, you need to have those receipts. So the best thing to do is set up an accounting gmail and call it whatever you want, accounting at whatever your company is. And every time you get a receipt, take a picture of it and just email it to that inbox. I'm going to a coffee shop after this to meet with my team. I'm buying the whole team coffee. Once I get the invoice, I take a picture of it, just text it, email it right to that inbox. If you use one of those things that automatically send receipts you just put in the accounting at your business, boom, all your receipts are there.
Nathan Hirsch [00:09:23]:
They're already dated of the dates of the email, and that's all you need. If you get audited, your bookkeeper should not need those receipts. They should just be going by your credit cards and bank accounts.
Claus Lauter [00:09:34]:
Hey Klaus, here. Just a quick one. If you like the content of this episode, subscribe to the weekly newsletter at newsletter ecommercecoffeebreak.com. I score and create 50 news sources so you don't have to saving your hours of research. Grow your revenue with ecommerce news, marketing strategies, tools, podcast interviews and more, all in a quick three minute read. So head over to newsletter ecommercecoffeebreak.com to subscribe as at 100% free. Also you will find the link in the show notes. And now back to the show.
Claus Lauter [00:10:02]:
One thing you mentioned is having access to bank accounts, to statements, reports from that side to financial reports. What kind of access do you need as a service provider to the merchant structure to be able to provide the right bookkeeping service?
Nathan Hirsch [00:10:17]:
Yeah, so you want to use business bank accounts and business credit cards. Don't use personal ones, even if you're using personal just for business. While legally that's okay. Personal accounts don't have the functionality that your bookkeepers need. So they have to be business accounts. And then you also want to make sure they're business accounts that allow view only access. Because if you don't do that, you're going to have to download the statements every single month and send them your bookkeeper. That's just one more thing you have to do.
Nathan Hirsch [00:10:42]:
It's more work for your bookkeeper. They're probably going to have to charge you more for the extra work. So make sure you're using a business bank account, a business checking account that allow view only access. If you don't have that, switch over to one that do. There are plenty that do, but that's my advice.
Claus Lauter [00:10:58]:
One question I have, a lot of sellers not are selling only in the US, but they're also selling internationally. And there's a lot of different sales taxes involved. I mean, even within the US there's a lot of different sales taxes. It can be very confusing. Is that something you help with?
Nathan Hirsch [00:11:11]:
We don't do sales tax. I mean, we'll record it from a bookkeeping standpoint. My advice is keep people in their zone of genius. So have a CPA that does your end of the year taxes and tax strategy. Have a bookkeeper that understands e commerce, that does your monthly bookkeeping, and then use a sales tax service like taxjar. There's a few of them out there to do your sales tax. That's what they specialize in. That's what they do really well, and they have a lot of software that automates that.
Nathan Hirsch [00:11:37]:
So it's kind of like different levels. And there's even another level, a CFO, if you get to a size that needs it, a part time fractional, whatever it is, and they can do more business decisions, business planning based on what the numbers tell you. So you definitely want to divide and conquer. I think a lot of people get into trouble when they try to have, like their CPA do bookkeeping, or their bookkeeper do sales tax, or their CFO do their end of the year taxes, keep everyone in their lane. And then you have a really strong finance team helping with your business. You also are paying people the right amount. If you pay your CPA to do bookkeeping, that usually costs way more than just having a bookkeeping specialist. And you're not necessarily getting a higher quality.
Claus Lauter [00:12:16]:
No, 100% agree. Makes total sense. Now with ecombalance.com, you're working with ecommerce sellers. Obviously, what are sort of the homework or the steps involved before they can start working with you.
Nathan Hirsch [00:12:27]:
Yeah, so we keep this pretty straightforward. I mean, you create an account on our website, you fill out a pricing form, so we have some information, and you give us access to your current books. And if you don't have books right now, two months of bank and credit card statement works too. From there, we'll get you a quote. Those quotes are two parts. It's a fixed price for any kind of setup, catch up, cleanup, a fixed price for your monthly. And normally we give a month free. But if you mentioned this podcast, you get two months free.
Nathan Hirsch [00:12:54]:
And from there, if you accept the pricing, you add a payment method and we start integration where we get access to everything we need. Kickoff call with our team and we hit the ground running. Catching up your books.
Claus Lauter [00:13:05]:
Excellent. Sounds great. A lot of sellers are selling on different platforms. Not only Shopify, eBay, Amazon, and all of them need sort of different reporting to a certain degree. Is that something you can provide or something you can help with?
Nathan Hirsch [00:13:17]:
From our side, we just provide income statement, balance sheet, cash flow, and we use a two x to connect to the marketplaces and pull in data. There are other tools that might get you certain information from Amazon and all of that. To me, that's separate from bookkeeping. Bookkeeping is income statement, balance sheet, cash flow, and we can customize those reports depending on what you need. But our service is strictly the monthly bookkeeping.
Claus Lauter [00:13:41]:
Okay, makes perfect sense. Give me the idea about the pricing. What can people expect to pay for your service?
Nathan Hirsch [00:13:46]:
So we custom price each client. It depends on transaction size, number of marketplaces that you sell on, and just overall complexity of the business. Our pricing starts at 399 a month. That's for ecommerce sellers. We do have some ecommerce sellers that are $2,000 a month that are selling on lots of marketplaces that are really big. But it's custom pricing.
Claus Lauter [00:14:05]:
Depending on your setup, who's your perfect customer? Is there specific industries or niche within the ecommerce that you work more with than others?
Nathan Hirsch [00:14:13]:
No. I mean, most private label sellers and stuff like that we work well with. If you're doing like wholesale or online arbitrage, we do work with them. You have to be a little bit bigger just because it's more expensive, because there's more products, there's more moving parts, stuff like that. But we work with all size ecommerce sellers. We've got longtime entrepreneurs that are opening up a brand new business that want to do their bookkeeping right from day one that start with us. We got other people that have been business for ten years. And so we definitely work with a variety of businesses.
Nathan Hirsch [00:14:45]:
And if you're non ecommerce, we have accounts balance that starts at 299 a month. That works with like agencies, software, stuff like that.
Claus Lauter [00:14:53]:
Okay, where can people find out more about you guys?
Nathan Hirsch [00:14:55]:
Yeah, connect with me on LinkedIn. Nathan Hirsch I post a lot of tips daily on the boring parts of business hiring and bookkeeping. Go to ecombalance.com, get a quote.
Claus Lauter [00:15:05]:
Excellent, Nathan. I don't think bookkeeping after this chat is as boring as I thought it is.
Nathan Hirsch [00:15:12]:
Glad to hear.
Claus Lauter [00:15:12]:
Still, I want to have an expert on my side doing that stuff for me because I'm not a perfect bookkeeper at all. So I would also recommend our listeners to give it a try to check the website out. There's a lot of information on there, and maybe think about outsourcing it to you guys. Thanks so much for your time.
Nathan Hirsch [00:15:30]:
Thank you.
Claus Lauter [00:15:31]:
Hey, Klaus here. Thanks for joining me on another episode of the e commerce Coffee Break podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show. It will make it also easier for others to discover the podcast, simply like comment and subscribe in the app you're using to listen to the podcast, and even better if you could leave a rating. Thanks again and I'll catch you in the next episode. Have a good one.