Case Study: Ecommerce Beauty Brand
THE CONTEXT:
Internet-born beauty startup Glossier had raised $24M in its series B as it looked to open permanent retail stores and take its brand international, at which point they decided to update their accounting team from offshore to in-house. Let’s just say their books could use a little makeover. A few of the core problems included:
The outsourced team didn’t have a good understanding of the business and the founder was not educated about the chart of accounts, so the financial reports delivered were not providing effective insights or strategic support.
Accounts payable lacked formal controls for approval and cash management.
The inventory management system was messy and the numbers were unreliable.
Employee spend didn’t have appropriate oversight so company perks were not tracked for proper adherence, and, without proper receipts, the outsourced team couldn’t properly code expenses at month end.
The root cause of these problems was a gap in policies, education, and technical accounting knowledge and oversight. Accounting was seen as a cost-function and, therefore, lacked the ability to drive strategic insight. The bookkeepers didn’t have a relationship with the internal team and there wasn’t an experienced CPG finance leader at the company to help the founder understand changes to the business or get feedback on the accounts. At a high-growth company like Glossier, the business looked different every 4-6 months, and the books fell behind.
OUR IMPACT:
The first in-house Senior Accountant at Glossier, now a principal at The Books, understood the importance of making sure the founders and key business execs had reliable financial data that told a story about the business and drove strategic decision making. She performed an efficient audit of the financials and underlying processes, and was able to make the following impacts very quickly:
She developed a thorough understanding of the business and re-vamped the chart of accounts to organize revenue streams and key spend lines, especially within marketing, which made the P&L much clearer to read for the key stakeholders. Most importantly, she created a budget vs. actual analysis that clarified otherwise hidden changes and practices within the business and and communicated them with leadership on a monthly basis.
She detailed monthly reconciliations for Balance Sheet accounts to ensure technical accounting standards were followed and audits would be easier to pass.
She implemented a control-centric, integrated cash management and accounts payable process which delivered cashflow insights and spend suggestions to the exec team on a weekly basis so they could stop personally managing invoices, checking the bank balance, and losing sleep over runway.
She digitized that expense management system to transform employee spend from out-of-control and unregulated to a near 100% compliance of receipt and explanation requirements of each charge. The system was user friendly, including a Slack integration, so the team didn’t hate submitting expense reports.
THE BOTTOM LINE:
Most of these problems could have been prevented by using a proper outsourced accounting firm that understands CPG and can scale with the business. By following a few standard best practices, there might have been a few less hiccups:
Set the right foundation with a chart of accounts that is built for your business today, and the business you want to see in the near future.
System implementations are expensive and even more costly when done incorrectly. Numbers are only valuable when they are accurate and complete. An seasoned, tech-forward CPG expert can ensure your systems are set up for accuracy now and as you scale.
Have rhythmic touch points with an experienced Controller from the outsourced firm (not just a report hand-over from bookkeepers) so you can understand changes to your business and adjust the financial insights to meet your needs.
Ensure your outsourced firm documents each key business process and understands the associated accounting impact to the books (like the power of capitalizing fixed assets or tracking R&D costs for tax credits). The firm should maintain the documentation at least annually; therefore, if and when you are ready to transition accounting to an in-house team or you require an audit, the documentation will save you thousands of dollars (and hours) in onboarding and transition or audit prep costs.
At The Books, we implement these baseline best practices for every client. Even if this is your first rodeo, we know what works and what doesn’t when it comes to finance and start-ups. We have over a decade of experience building and scaling accounting teams for consumer brands that you (and we!) know and love.
Our higher purpose is to help you make your dreams come true. We’re proud that our job is to partner with courageous, game-changing founders and execs like you and understand what you need, and answering the questions that pile up as your business and team grow; like, “where is the cash going? How much cash is left and low long will it last us? What’s our gross profit margin and has it increased or decreased in the last six months?”
If you are interested in working with us, or just want to learn more, get in touch! We can’t wait to help your business grow.
