3 Warning Signs Your Bookkeeping is Holding Back Your DTC Brand’s Growth

Episode Summary

In this episode of the Free to Grow CFO podcast, Jon Blair and Jeff Lowenstein discuss the critical role of bookkeeping in scaling direct-to-consumer (DTC) brands. They highlight three warning signs that indicate poor bookkeeping practices, including the misclassification of sales tax, the absence of sales tax in financial statements, and the erratic swings in profit margins. Throughout the episode, Jon and Jeff stress the importance of having a clear understanding of your financial metrics and how they inform your decision-making process. They share real-world examples from their experiences with clients, illustrating the potential pitfalls of poor bookkeeping and the value of having a dedicated team that understands the nuances of e-commerce accounting.

Key Takeaways:

-Contribution margin is your real top-line revenue. Understanding it is key to profitability.

-When you run your books on cash basis, you miss out on the true financial picture of your business.

-Erroneous bookkeeping can lead to poor financial decisions.

Episode Links

Jon Blair - https://www.linkedin.com/in/jonathon-albert-blair/

Jeff Lowenstein- https://www.linkedin.com/in/freetogrow-jeff/

Free to Grow CFO - https://freetogrowcfo.com/

Meet Jeff Lowenstein

Jeff was previously leading M&A efforts at ecommerce aggregator Boosted Commerce where he was the 5th employee. He built processes across M&A, finance and operations to support rapid growth from 0 to 30 brands under management in 2.5 years.

He previously co-founded and exited an app for Shopify merchants and spent time in the Strategic Finance departments of Etsy and Caesars Entertainment. Jeff holds a BA from the University of Pennsylvania and an MBA from Harvard Business School.

He’s worked with hundreds of brands over his career and founded Free To Grow because of his passion for supporting entrepreneurs and helping them succeed. The analytical and financial tools he has developed over the years are specifically crafted for the modern consumer brand.

Timestamps

00:00 Introduction

01:09 The Importance of Solid Bookkeeping Beyond $10 Million

02:15 Warning Sign #1: Sales Tax on Your P&L

08:34 The Impact of Poor Bookkeeping on Decision Making

14:12 Warning Sign #2: Missing Sales Tax in Financials

18:12 The Importance of Accrual Accounting in E-commerce

22:40 Warning Sign #3: Wild Margin Swings Month Over Month

33:04 The Role of Intentional Bookkeeping in E-commerce

39:12 Closing Thoughts