Amazon Bookkeeping Best Practices w/ EcomBalance Founder Nathan Hirsch – #29

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The Brand Builder Show
Amazon Bookkeeping Best Practices w/ EcomBalance Founder Nathan Hirsch – #29
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Welcome back to another episode of the Brand Builder Show!

This week we’re joined by serial entrepreneur Nathan Hirsch.

Having scaled and sold the popular outsourcing marketplace FreeeUp, Nathan and his partner Connor recently launched EcomBalance. It’s a bookkeeping startup focused on helping Ecommerce sellers get financially strong to build successful businesses.

In this episode we’ll discuss best practices, biggest mistakes, and keys for adding value to the asset that is your business. Enjoy!

> Get 2 months free with EcomBalance (mention the Brand Builder Show for this special offer!)

Helpful resources:

If you got this far, there’s a chance you enjoyed the episode… if so, please consider leaving a review – we really appreciate it!

Talking Points:

00:00 Ben Introduces Nathan Hirsch

00:34 Nathan Talks about his journey with Amazon

07:34 How to sell your company and find the right buyer.

11:57 Key Process and Financial Habits

15:02 Why we need to hire a bookeeper or an accountant?

16:11 The Importance Of Healthy Books

19:45 Nathan Talks about eCom Balance.

22:59 Pain points in the eCommerce industry

30:13 Biggest bookkeeping mistakes eCommerce sellers make with their finances

31:24 Processes or principles eCommmerce should have in place to increase business value

32:33 Where to get started with eCom Balance

Ben Donovan 
Hey, folks, welcome back to another episode of The Brand Builder show. Today’s episode is going to be about all things finances, which might not sound too sexy, but we are going to make it our mission to make it very sexy for you today to join me to talk about this topic. I’ve got none other than Nathan Hirsch. Nate, welcome to the show.
 
Nathan Hirsch 
Ben, thanks so much for having me. It’s a pleasure to be here.
 
Ben Donovan 
The pleasure is mine. For those very few people out there that don’t know who you are and haven’t heard your story. Tell us a bit about yourself. The journey of entrepreneurship for you catches up to sort of where you are today.
 
Nathan Hirsch 
Yeah, sure. So I’ve, I’m a longtime entrepreneur, I’ve never had a real job. I’m 33 now. But I started selling textbooks when I was in college. And that kind of led to me opening up an Amazon account and kind of experimenting, what different products I could sell on Amazon. And this is back in 2008 2009. Before Amazon was cool before everyone else was doing it. My business partner Connor and I we were selling millions of dollars of baby products on Amazon, we got in and we got out pretty early, we were drop shipping before we even knew it was called drop shipping. And we kind of we leveraged that into our hiring platform called free up and the reason being that we were hiring college kids and they were very unreliable. And then we discovered the VA world and got really good at virtual assistants and freelancers and built our Amazon business with it. And then we started offering the same ecommerce freelancers to other Amazon sellers and turn that into the free up marketplace. And it was kind of fun free up was our first chance to grow our own brand I noticed is that the brand building podcast like with Amazon, we’re kind of just dependent on Amazon listing products. There wasn’t really PPC so it’s kind of like listing products and crossing your fingers and learning a little bit about keywords. Whereas with free oppo is building our website and going on podcasts and building a personal brand and SEO and all the stuff that goes with it. So we learned a lot. We scaled that business for four years before We’re being acquired at the end of 2019, which is a whole another story we can dive into if you want. And from there, the original plan was to take a year off and travel the world. But of course, the pandemic hit. So we were kind of stuck at home. And we launched a course called outsource school, which we still run. It’s our unique hiring process that we use to to scale our businesses. But we spent a lot of time just brainstorming what we want to do next. I mean, we love building businesses, we want to do something outside of the VA Freelancer space, but we love the E commerce space and all things being given, we’d love to stay in it. So we had the idea to start a bookkeeping service called ecom balance. We love financials, we love unsexy businesses that have big markets that that kind of apply to everyone and help a lot of businesses and it’s kind of the core of everything. If you can’t hire or you don’t understand finances, you’re not going to be a successful entrepreneur. So we interviewed 200 Plus ecommerce sellers learned a lot about competitors and pain points and what people liked when they don’t like we built the team here in Colorado of really high level ecommerce, bookkeepers and did a bait around a client’s and use that to perfect our processes. And now we’re up and running and hopefully scaling this thing. So that’s kind of the short long version of how I went from textbooks to drop shipping baby products to free up doubts or school that ecom balance.
 
Ben Donovan 
Yeah, she got 25 questions in response, we’ll try and we’ll try and get through them. methodically, I definitely would be keen to hear about those pain points that you discovered when starting on balance, which we’ll get to, and definitely keen to hear about the exit of free up because I think any entrepreneur, especially in the E commerce game, the last couple of years, the topic of exiting a business is so popular now that everybody wants to hear about exit stories. So just briefly touch on that. But also quickly before we do get into that. One of the things I find interesting from what you said is you started this business in your uni dorm with Connor, and you’ve just started ecom balance with Connor, you started several businesses with him. What are you guys doing? Because they say, you know, the only ship that doesn’t sail is the partnership. Right? You know, that’s what I’ve heard before. And working with a business partner can be a challenge, but you guys are clearly doing it successfully. How you make it work?
 
Nathan Hirsch 
Yeah, it’s a great question. So I mean, funny story about Connor, he I actually started the Amazon business before him and I was hiring college kids, like I said, and most college kids were not reliable. The one college kid that was reliable was Connor. And he was in my business law class. And he sent me a Facebook message one day saying, hey, I need a job. I don’t know, I saw that you do something online? Are you hiring? And I didn’t even interview him. I just hired him. And on the first day, he sent me a message say, Hey, by the way, I don’t have a car, can you come pick me up? And I’m like, Who is this guy? Like, why would I do that? For some reason I did. And on those car rides back and forth from the campus to my frat house that I lived in, we just had a lot of business over conversations, we got to know each other, we learned we had the same values, the same goals, the same aspirations, but a very different skill set and, and I eventually made him the partner in my Amazon business. So I mean, I agree with everything you said partnerships can be scary. I like you. And a lot of people listening had partnerships that didn’t work out. And Connor and I, we work very well together, we have very, very different personalities, I’m a little bit more rah rah and fast and all in and he’s much more calm, cool and collective. And the nice guy there and he’s also very good at stuff I’m not good at like building websites, and SEO and lot of the backend marketing, um, a little bit more of the face and processes and, and building really good customer service systems. So we complement each other very well. Though we have the same values, we believe in taking care of our team taking care of our clients, building businesses that are scalable and run without us. A lot of times if you and your business partner have different goals, like if one person is trying to sell it or, or cash out and the other person is trying to grow it, it can really go against what you guys are trying to build together. So we have the same values, but very different skill sets. And I think that’s what makes us work well together.
 
Ben Donovan 
Yeah, I think every time I’ve seen an example of how it’s worked well there is definitely those complementary skill sets, character traits. And so I think there’s a real secret in that for for making it work successfully. So now that’s really good. Talk to us a little bit about free up then briefly before we do get into the world of finances, because I think it does have a big part to play in the story. Because, you know, you guys you wrote a blog article recently that I read and maybe Connor wrote it and it was talking about how you know the ability to sell free up was only really there because of your financial practices. So before we do get into finances and that kind of, you know, topic, talk to us about free up what was the you know, selling a business process like was it stressful, enjoyable? How did you find that kind of end stage?
 
Nathan Hirsch 
Yeah, I mean, it was the most stressful six months of my life. I buy it by far. And then that’s with clean, immaculate books. I mean, one of the things we did great was we hired a bookkeeper from day one before we were even profitable, so that the month would end within 10 days of the month being over, we’d get a report, we’d review it together, we had that monthly meeting that you read about in the blog article. And we’d make real decisions based on what the numbers were telling us. And that was a big part of scaling, but also a big part of passing due diligence. One second,
 
Ben Donovan 
yeah, never so good, man.
 
Nathan Hirsch 
So, we didn’t go into 2019 saying, Hey, we’re gonna unload this business. By the end of the year, we build our businesses to be sellable in the sense that they run without us. Hopefully, they’re scaling and they’re profitable, and they’re cashflow positive. But about halfway through the year, we got mess. We contacted by one of our clients, Mark Hargrove and David Martin from the Hoth, saying, Hey, we love the freelance face, we buy a lot of businesses, we don’t want to start from scratch, will you guys be interested in being acquired? And so at that point, we’re just hearing them out just like we would any business opportunity. They asked us some basic questions about the business about our numbers. But what really helped us is we knew our numbers inside and out, we knew everything going back for years. And that built a lot of trust early on, because the next step was actually sending them our numbers and everything we told them on the phone. And that’s exactly what was in our Xero account our documents or reports, and that helped build trust. Now, at the same time, and this is a big tip for anyone going to sell their business. We were doing due diligence on them, just like they were doing due diligence on us. So they were sending us over 20 questions every other day, it seemed like and we were responding quickly, they told us that we were some of the fastest people that respond because we had all this data, we had all this information, we didn’t have to go pull it out. At the same time, we would respond back with 20 questions, we want to know everything about them. The businesses they bought in the past success failure, how they treat people, what their plans are for free up, we didn’t want to sell it to someone who’s going to run into the ground or hurt our reputation or hurt our team or anything like that. And we were super impressed. Now, does that mean we agree with every business decision down the line? No, we you know that going in, if you’re going to sell your company, people are going to have their own decisions. And I do think they’ve done a great job. But it does mean that you want to sell to people that are high integrity, high value, the last thing you want to do is have them blow up your business or end up in a lawsuit or anything along those lines. And you never really know. I mean, you’re we’re crossing our fingers and hoping after we sign the paper that everything we had found out about them was true. But they honored their word outside of paying us everything they’ve helped us promote ecom balance just to be nice, we’ve kind of turned to them as mentors and and look up to them. So the process was long, it took six months. It wasn’t their fault. It wasn’t our fault. Lawyers take forever. I mean, for. For us, it’s the biggest moment of our life for the lawyers, it’s just another Tuesday and they have other clients and other things going on. So that dragged it out. But obviously, we’re happy that it went through and we couldn’t be happier to who we sold it to.
 
Ben Donovan 
Yeah, that’s awesome, man exciting. And then the kind of exit has happened is the temptation then just to kind of like run off, and never work again, live on a beach for the rest of your life.
 
Nathan Hirsch 
So I think the way I work definitely changed. I mean, I definitely work more like nine to five normal business hours taking a day off whenever I want, making sure I’m not doing podcasts at night or anything like that. So I definitely had a different mindset in life. And it allowed me to, to really just have the freedom to only do things I want to do and really say no to everything else. At the same time we enjoy building businesses. I mean, our goal is to build ecom balance, bigger than we did free up, we’re gonna go about it a little bit differently. They, like I said, kind of valuing our time, even more than than we did at free up. But yeah, I don’t think we were ready to retire. And kind of like I said that the original plan was to take a good amount of time off. But if you’re stuck at home, you can only watch so much Netflix and read so many books before you’re itching to do something you know, it’s true.
 
Ben Donovan 
That’s very true. No good, good stuff. Okay, well, let’s get into the finance side of things then because I mean, there’s so much that we could talk about and processes and outsourcing and structuring and, but finance is obviously a massive part of your journey and your growth and now a part of your current journey with ecom balance. We talked about that article that talked about the monthly meetings that you would have, can you talk to us a bit about some of the key processes and financial habits that you developed? It was alluded to in the article, but maybe we could draw out on that a bit. Some of the things that you did on a regular basis that really, you know, built financial strength into your business.
 
Nathan Hirsch 
Yeah. So here’s kind of what we learned from our Amazon business. So our Amazon business we We started off not doing any books. And we were just dumping on our accountant at the end of the year. And that’s what a lot of people do. And not only are accountants really not meant for just doing lots of bookkeeping, they’re definitely not meant for putting it in a way to display it to you. They’re trying to do it to file taxes. And it’s tough to make decisions on any numbers if you’re only doing your books at the end of each year. So that was a big mistake, we then transitioned into doing the books ourselves, which I would argue now is a bad idea for two reasons. One, it’s just not a good use of your time. Most people, most entrepreneurs should be spending their time growing and scaling the business launching new brands, whatever it is, then actually doing the books. And second Me included doing most entrepreneurs, nine out of 10 just aren’t good at doing bookkeeping. And any time they spend doing bookkeeping just has to get redone down the line by someone who actually knows what they’re doing. So those were some mistakes I learned from my Amazon business. And when we started free up, we set out to not make those mistakes again. So day one, we hired a bookkeeper, it was an important role, we spent a lot of time making sure that we hired the right one. And every time the month would end, within 10 days of the month, or within 10 days of the month being over, we would get a report income statement balance sheet cash flow, and we had a meeting on our calendar, Connor and I every single month. And we would go through the reports. And this is early on in the business before we’re really making money. So most of the reports is just expenses and different types of expenses and trends that are going up and down. But you’re making decisions because you’re comparing that report to the month before, eventually you’re comparing that report to the same month last year, and you’re seeing how your business is doing are your margins going up are your expenses going up faster than revenue? Are you having a busy summer or slow summer compared to last year, these are decisions that you get, or these are numbers, things that you can see and actually make decisions on. Instead of just flying blind and guessing or just going by how much money you get to deposit into your bank account. That’s not a great way to make decisions. So that allowed us to make really good decisions. It also allowed us to not stress at the end of the year when tax season came because we already had clean books ready to go. It also helped us sell the business and pass due diligence. So there’s a lot of benefits to having clean books every single month. And if you’re working with a firm that’s only doing books once a quarter or the winter, the end of the year, or maybe they’re doing your books, but then they get caught up in busy season and and they fall behind. That’s a bad system to have set up. You want it to be automatic the month ends within 10 days, you get the reports and there’s a meeting on your calendar with your business partner, your husband, your wife, your team leaders, whoever it is to go through the numbers and make real decisions based on what the numbers are telling you.
 
Ben Donovan 
Yeah, that’s good. What would you say to someone that says that’s great, but I’m a new business. I’ve got all these other expenses. And now you’re expecting me to pay a few 100 bucks a month for bookkeeping as well.
 
Nathan Hirsch 
Yeah, I mean, if you’re a serious entrepreneur, you got to do it. It’s a necessity. It’s like having an accountant. It’s like having a lawyer, like these are things you have to have when you’re running a business. And it’s going to cost you way more money if you’re making decisions based on gut instinct, rather than than what the numbers are telling you. And there are creative ways around it right? Like you don’t have to hire a bookkeeping service, like our monthly minimum is 250 a month. So maybe you can’t afford 250 a month, but maybe there’s some other servers that’s $100 a month that you can start with. And and maybe they’re perfect for a small business and and eventually you upgrade, like you can start small and switch service providers down the line. But bottom line, you shouldn’t be doing your own bookkeeping, and it’s something that has to be getting done every single month.
 
Ben Donovan 
Yeah, yeah, that’s very reasonable. Can you can you give us some examples of some maybe some practical examples, when you get this report each month? What are some of the things that you’re looking for? What are some of the decisions you’re making? Because of the data? You’re seeing either recent examples from ecom balance, or, you know, from way back when when it was? You know, earlier on just Yes. To help really drive over people?
 
Nathan Hirsch 
Yeah, so Well, we really do is we start with the income statement, and we really go from the top down. So the first thing you want to look at is sales. So for free up, and this is different for an ecom business, but it was fixed price projects versus hourly projects. And we would see, hey, which one’s going up? Which one’s going down? Is one growing faster than the other? If you’re an Amazon business, you might see different marketplaces and say, Oh, Amazon, Japan is doing way better than it was last month or, or maybe it skews and you have one product that’s drastically outselling it because of a new PPC strategy. So you’re looking at the top line, but then you’re also looking at those gross margins. And this is something that Connor and I we’re constantly looking at it free up. Where are we making 20% We’re making 15%. If the gross margins were going too low, that might be a sign that you need to figure out how to increase prices or decrease costs. So at some point to just make that sustainable. The other thing we look at is hiring strategy. You don’t want to wake up one day and be like, I gotta hire this person, you want to plan out your hiring, and everyone has a different budget, maybe you look at it and your expenses have been going up, and you can’t afford to hire that person. Or maybe it’s the opposite. And you’re like, man, we can really start thinking about hiring that full time SEO person that we talked about a few months ago. So those are just some random examples. But we go through that top to bottom. With free up the balance sheet wasn’t as important because it’s a very cashflow, cash upfront type business. But with an E commerce business, that’s something you definitely want to go through. You want to know what what your inventory situation looks like how your assets and liabilities are looking. And depending on your business, like we have one client who projects our cash flow 16 weeks in advance, because summer is a very slow month for them, their business is very seasonal. So that’s something to look out. So you know how much cash is going to be in your bank account to make sure that you can meet payroll and and make any adjustments. I mean, God forbid, you have to cut back someone’s hours or whatever it is, these are things that you want to be able to plan for. Same thing if you need to get a loan or get some kind of cash upfront, you have to be able to plan that stuff out.
 
Ben Donovan 
Yeah, for sure. Man, and cashflow is such a big thing. You mentioned it there. And I wonder if maybe this is a question for someone that’s maybe in the trenches more with bookkeeping. But in terms of like the cash flow protocols, do you guys have anything that you use or give to clients? Because I think obviously bookkeeping is one thing, cash flow, especially with ecommerce, especially with Amazon because your settlements are you know, they’re not a gross per amount they’re a net amount you’ve got different kinds of fees coming in from different places you’ve got your inventory to pay at different stages deposits balances you know it’s so like you say free up I imagine was cash coming in and cash coming out ecommerce, there’s things coming in and out all different times. What’s the solution there?
 
Nathan Hirsch 
Yeah, I mean, the solution is to be on top of your cash I read somewhere that a lot of ecommerce businesses go out of business not because they’re not profitable, because they just run out of cash. And especially if you’re really building a brand, you might work with some retailers that are a net 90 or net 120 terms. I know I’m friends with the people over at cross and and and they do a lot on Shopify, but they also work with a lot of brand store or big box stores and and these are factors and they also have to meet payroll and all of that. So we do offer a cash flow projection service or our core services that monthly bookkeeping service, but we’ve got some different add ons for people that that are interested in that and something you just got to be on top of.
 
Ben Donovan 
Yeah, for sure. Yeah. Well talk to us a bit about Yukon balance. Then you started that. Was it six months ago now? Summer?
 
Nathan Hirsch 
Yeah, towards the end of last year?
 
Ben Donovan 
Yeah. How’s it going?
 
Nathan Hirsch 
It’s going great. It’s a it’s been a lot of fun. It’s been cool to kind of see the projection. So I kind of mentioned we did a, we did it about we interviewed about 200 ecommerce sellers. We we pick the name of a business, which is one of my least favorite things to do. But we did that we got our website after all of that we started hiring I mean, the first hire is key since Connor and I are not bookkeepers. So we spent a lot of time finding a controller here in Colorado, who has ecommerce experience, obviously a ton of bookkeeping experience, or named Shelly as she has been in the space for 20 plus years. So she’s done a fantastic job so far. And then we really built a team around her of both us and non US bookkeepers. We have a team in Colorado, we have a team and in the Philippines, the team in the Philippines are not virtual assistants, they’re high level CPA equivalents with a ton of bookkeeping experience. And by having that hybrid, it allows us to a be efficient, but also be have very fair pricing, we’re not trying to be the cheapest, we’re not trying to be the most expensive, we want a really high level service at a very fair price. And that allows us to put a US person and a non US person on every account. So we build that out, we launched a beta round giving out two free months to to a bunch of clients. I think we had 35 People in our beta round. And they were super patient with us. We were very appreciative of those beta people as we kind of figured out everything from from pricing to integrating clients to having kickoff calls, to the catch up and cleanup work to actually doing the monthly books. And once we got done with those beta rounds, we hired a few more people had some meetings, fixed up the processes, and then turn on marketing, which is why I’m on podcast now to try to ramp this up. So that’s kind of the point where I now we’re definitely early. I don’t think we’re slow. I don’t think we’re fast. I think we’re somewhere in the middle. I tend to be a pretty quick person who wants to get stuff done and provide a great experience and move as quick as possible. I’m not sure we’re there yet, although I would put our bookkeeping team against anyone out there. But if people listening or are interested in a high quality service, it gets still bear with us as we go through some early growing pains in year one. I think we’re the perfect solution out there.
 
Ben Donovan 
Yeah, and it’s a very unique type of service because when you’re dealing with people’s finances obviously it’s such an important part. It’s not You’re not building like some keyword research tool or inventory to like, this is the actual bookkeeping. Right. So it’s, I can imagine the stressful making sure you get it. All right.
 
Nathan Hirsch 
Yeah. I mean, they’re stressed to an extent, I think free ops a little bit more stressful. I mean, the thing about the thing about bookkeeping is a I think we have a great team that knows bookkeeping very well. So I’m less concerned about making issues. It’s also less of like a 24 hour affair, like our team works, pretty normal business hours, within reason, free up like a VA could quit on weekends or something like that. There’s very few like red flags, or fires that come up on like, weekends or nights when it comes to bookkeeping, obviously, that depend on us doing a really good job and, and we have high level support and great communication, keeping clients updated to prevent those things. But it’s been fine kind of learning a new industry.
 
Ben Donovan 
Yeah, definitely. Yeah. What were the pain points in the industry that you saw? Because, obviously, bookkeeping, these bookkeeping, there’s a myriad of bookkeepers out there that could people could hire what were the specific pain points that you guys, you guys are astute entrepreneurs. And so you obviously see a gap in the market. What were those things that you saw weren’t being delivered on?
 
Nathan Hirsch 
Yeah, so a lot of times people will a hire a virtual assistant that knows bookkeeping, but the entrepreneur doesn’t know bookkeeping. So you’re kind of managing a skill that you don’t really know. And it’s tough to make that happen at a high level. Another thing that we saw is people hiring bookkeepers that don’t understand ecommerce, and there’s a large learning curve there. And it’s tough or bookkeepers that only speak bookkeeping. I think one of the unique perspectives that we have is we’re entrepreneurs. First, we’re ecommerce sellers. First, we speak the language we know it information needs to be present, presented, we have great bookkeepers that know their craft very well. But we can bridge that gap. So the average person who doesn’t love bookkeeping, as much as our bookkeepers do, can understand what’s going on and make decisions. A lot of people will also hire CPAs, who are much more focused on the tax side than the bookkeeping side, because there’s a way to do books correctly, and pay the right tax at the end of the year, while also not displaying it in a way that people can make monthly decisions on and having that automatic thing like we talked about where the month ends, and then you’re able to have those meetings every single month. There’s also very specific ecommerce nuances like Amazon reports, and using the right tools to get data into QuickBooks, a lot of bookkeepers will just take the money deposit into the checking account as the top line revenue when we both know that that’s not the case. And then cost of goods and inventory has its own challenges when it comes to e commerce, stuff like Cost of Goods averaging or being able to use stuff like tell seller board to get inventory information that becomes key and why it’s so important for bookkeepers to have ecommerce experience. And kind of the last feedback we got is there’s a lot of mom and pop bookkeeping firms out there that do a very good job, but struggle with scaling. They’re not good at hiring, they’re not good at processes. They’re good to a certain point, but then they get too many clients. And I think that’s something that we want to avoid that we’re very cautious of just because we heard a lot of feedback. On paper, we’re good at hiring, we’re good at processes. We’re good at building a business like an entrepreneur, we still have to execute improve it. And entrepreneurship can be very humbling. But that’s something we’re very focused on that we heard from our feedback that a lot of other places struggle with.
 
Ben Donovan 
Yeah, yeah, no, definitely. That’s good. You. You mentioned there about a lot of the challenges that people face. Obviously, this challenge is in growing a business just last one on ecom balance before we get into some ecommerce specific financials. Are you now looking at this as something to build to sell like you did with free up? Or is this something you’re gonna have forever?
 
Nathan Hirsch 
Everyone? Oh, he asked me that. So I guess we didn’t go into 2019 thinking we were going to sell free up and we have no, we have no plan to sell ecom balance. So we definitely don’t build businesses. We’re like, we’re building this and in two years, we’re going to sell it. We build businesses that are sellable in the sense that they have a good people, good processes, I could go on vacation for two weeks, maybe not now, just because we’re in the first six months of the business, but within the next few months, like that’s very, very doable. And so yeah, sure if the right opportunity comes up with the right buyer, are we going to listen to it? Yes, but that’s not our focus. Our focus is to be the best e commerce bookkeeping service out there. And hopefully grow this bigger than that a free app, we want to grow this to over 1000 customers more poorly. We want great feedback across the board. I’m kinda like you a kills me inside to have any kind of bad client or customer experience. And I want to do everything possible to avoid that. Or if the mistake happens, which does happen and start off so you make it right quickly and you make it up to the client and you hook them up with extra services or whatever. So that’s kind of my focus right now and the rest will take care of itself.
 
Ben Donovan 
Sounds awesome, man. That’s awesome. Okay, let’s finish out them with just a few thoughts on E commerce for E commerce sorry, financials for E commerce entrepreneurs, the people that are listening now that selling on Amazon and on Shopify building a brand. And they just don’t know much about financials. You talked about the reports you look at each month with Connor, what are some of the metrics that sellers should be looking at every single month to get a real good handle on how their business is performing?
 
Nathan Hirsch 
Yeah, it’s a loaded question. What I’ll say off of that is when we once we do any kind of catch up, or cleanup work, and once we actually have the report ready to go, we’re gonna go through it with you. And it can be very different depending on what your business or what your business is, if you’re an Amazon wholesaler, that’s gonna be way different than if you’re a private label seller that’s selling on Shopify, and Amazon and maybe some different Amazon marketplaces, you might have five SKUs, and only one of them is profitable. And this is stuff that you have to understand. So what we’ll want to do is we want to first of all, get the books caught up and get them to a good point, but then be able to go through it with you. And we don’t, our goal is to not have to have like calls with you every single month, and most people don’t want to talk to their bookkeepers every single month, we’re there if needed. But our mentality is, if we can’t put data in a way that you can easily understand without having to talk to us every single time, then we’re doing something wrong. And that’s something that we take very seriously. And, and there’s some upfront learning, like we have a meeting today where we’re going through our chart of accounts with the client, because one thing we’re very good at is creating charts of accounts that break down things in the proper way and again, are very easy to understand. But we want to go through it that so I know that kind of avoid your question. But every business is a little bit different with with what’s important to your business and what’s not. Yeah,
 
Ben Donovan 
yeah, no, that’s fine. And it gives me an opportunity to ask about that because chart of accounts is very, very important. I agree having that clarity on your profit and loss to see where the money’s going is so key. Without literally breaking it down line by line. Can you give us some thoughts on that in terms of how you structure it?
 
Nathan Hirsch 
Yeah, it’s a fine balance. Like, you don’t want an income statement that’s 53 pages long. At the same time, you don’t want it just to be expenses, and everything kind of goes in there. So it’s kind of that that in between where you’ve got different line items, those line items are actually helpful. You actually know, hey, this is going to us payroll, this is going to non US contractors, this is going to PPC ads, whatever it is, and be able to do that. Well, I think is a very unique skill set that not all bookkeepers do again, you can do bookkeeping in a way that has you file the right amount of taxes, while not actually displaying things in a way for you to understand and show you our controller spends a lot of time with every bookkeeper we hire, teaching them the right way to do charts of accounts. So it’s unified across the board, you might have a different business that might have a line that another business doesn’t. But it’s the same numbers the same, like it might be 504, down to 706. Like it’s the same numbers across the board so that everything everyone knows what’s going on.
 
Ben Donovan 
Yeah, that’s great. That’s great. Aside from what you’ve already mentioned, obviously, what are the biggest mistakes that you see ecommerce sellers making with their finances?
 
Nathan Hirsch 
I mean, I think one of them is just doing the books themselves, or do you talked about another one of them is not using a connection tool. So if you’re just getting Amazon reports and trying to put them in QuickBooks, that can be a disaster, we use a tool called a 2x. That makes it very simple to pull data in there. There’s some other tools as well that we’ve tested. But we found that a 2x is the best, and how you do cost of goods and making sure you’re on an accrual basis, a lot of sellers will buy a lot of inventory in January, and that’ll show up as a $50,000 expense in January, but it’s not but then your your January is going to show a huge loss, February and March are going to show big profits doesn’t really tell you anything. So being able to cost you guys average it out and be able to have your books on accrual basis not only helps you make better decisions, but it’s going to help you get a better multiple when you go to sell your business.
 
Ben Donovan 
Yeah, definitely. Which leads really well into my last question for you. Accrual accounting is obviously one of the big keys. Are there any other processes or things principles ecommerce sellers should have in place if they want to maximize the value of their business? Yeah, I mean,
 
Nathan Hirsch 
accrual accounting is important using the right software like a to x to connect Amazon or Shopify to QuickBooks. That’s very important. Having the right chart of accounts and the right ways to do inventory is very important, making sure that you’re using Cost of Goods averaging, or that you actually know what your inventory costs are. Those are very important, especially if it comes to the sale but also to just make important decisions each month.
 
Ben Donovan 
Yeah, do you make a habit of updating your the inventory costs each time there’s a new inventory order so for to account for variable shipping costs, etc?
 
Nathan Hirsch 
Yeah, so there’s a few different ways we can do it depending on what the business is and what current setup people have for inventory. The easiest way by far is just Cost of Goods averaging. But there’s other people that are very on top of what their inventory costs are, and they just provide us that data to put in there.
 
Ben Donovan 
Yeah. Awesome, man. Awesome. So yeah, it sounds like this is gonna be a great solution for E commerce sellers that are looking to get a real good clear idea of how they’re performing financially. What’s the best way if people do want to find out more about ecom balance? Where can they go? What’s the service you guys offer? Give us a bit of a pitch.
 
Nathan Hirsch 
Yeah, so free to connect with me on social media at Nathan Hirsch on any social media channel, go to ecom balance.com mentioned this podcast and get two free months of bookkeeping, or core service is that monthly bookkeeping, we charge on the first of the month, you get your books between the 10th to the 15th. Every single month, we can help with any catch up and cleanup work. We can help with some additional add on services like cash flow projections, sales tax, stuff like that. But our core services that that monthly bookkeeping.
 
Ben Donovan 
Yeah, amazing. Well, we’ll make sure there’s links in the show notes in the description so people can easily find you guys as well check out all the services you offer and get their finances in a healthy state. Nathan, it’s been a pleasure to have you on and we’re wishing you all the best for ecom balance.
 
Nathan Hirsch 
Thanks, man. Have a great rest of the day. Awesome.
 
Ben Donovan 
Great, guys. Thanks for joining us on this episode today. Hopefully you got plenty of value from that. Definitely check out ecom balance, and we’ll see you in the next episode real soon.