Portfolio sample originally written for Finaloop. Figures below come from the brand’s original Tabs Chocolate and The Magic Brand case studies.
As The Magic Brand grew, its bookkeeping systems struggled to keep up with orders, inventory costs and financial reporting.
Sales, inventory, payments and bookkeeping sat in separate systems, leaving the team to reconcile data manually. That made reporting slower and reduced visibility into margins and cash flow.
Tabs Chocolate also had to reconcile sales, stock and accounting records held in separate tools. Both examples show the operational work behind a connected finance setup.
This guide covers:
- How disconnected financial systems affect reporting and reconciliation.
- Two company examples, including the results reported in Finaloop’s case studies.
- Ways to evaluate integrated systems and improve financial workflows.
How fragmented financial systems affect ecommerce operations
Financial fragmentation happens when a business records orders, payments, inventory and expenses in systems that exchange little or no information. The finance team then has to reconcile those records before it can see reliable margins or cash flow.
1. Unreliable data
A store records a sale, but accounting receives it days later. Revenue reports can disagree until the transaction is imported and reconciled.
If these variations start to happen frequently, the inconsistencies will compromise the accuracy of financial statements and make it difficult to track the true performance of your ecommerce business.
2. Operational inefficiencies
For most ecommerce business owners, managing multiple financial systems requires manual data entry and reconciliation. Hello, human error.
The manual handling of data increases the likelihood of mistakes and consumes valuable time.
A finance manager may export orders from a marketplace, match them to payment settlements and then correct inventory costs in the accounting ledger. Doing that manually for every channel creates more places for errors.
3. Lack of real-time insights
If inventory records are updated at different times, the team may sell stock that is already committed elsewhere. Finance then has to trace cancellations, refunds and stock movements to understand the actual cost of those orders.
When the systems disagree, even basic questions can take hours to answer: Which products are profitable? What is owed to the business? Why did the last payout differ from the sales total?
4. Difficulty in scaling
A growing DTC brand or multichannel retailer will find it difficult to scale operations efficiently when relying on fragmented financial systems in the long run.
The lack of scalability will hinder growth and create obstacles in maintaining financial control.
Two examples of fragmented financial systems at ecommerce brands
Finaloop’s case studies of Tabs Chocolate and The Magic Brand show two ways fragmented reporting affected growing direct-to-consumer businesses.
1. The struggles of a growing DTC brand
Tabs Chocolate, a direct-to-consumer chocolate brand, faced financial visibility and reporting challenges as it expanded.
Initially, the company used separate systems for different aspects of its business:
- Ecommerce sales: Managed on a distinct platform.
- Inventory management: Handled separately.
- Financial accounting: Used a different system for bookkeeping.
As the brand’s sales volume increased, reconciling data between these systems became increasingly challenging.
Manual data entry: Sales data from the ecommerce platform was manually entered into the accounting software. This was time-consuming and was later found to have caused errors, which led to inaccuracies that hindered financial oversight and decision-making.
The solution
To address these issues, the brand implemented Finaloop’s unified financial platform, which offered:
- Real-time integration: Unified integration of ecommerce sales, inventory management, and accounting functions.
- Rapid onboarding: Finaloop was onboarded within 10 minutes, and financial data was reconciled within 24 hours.
- Expert support: A one-hour meeting with an Onboarding Specialist closed all open items and set up accurate financial tracking.
Results
In Finaloop’s published Tabs Chocolate case study, the company reported the following outcomes after adopting the service:
- Increased profitability: Net profit improved by 9.4%.
- Higher sales: Monthly sales increased by more than 15%.
- Time savings: More than seven hours a month saved on administrative tasks.
- Enhanced visibility: Insights into previously hidden expenses and a better view of marketing-budget decisions.
2. The Magic Brand’s financial management
The Magic Brand, a rapidly growing provider of wireless adapters for Apple CarPlay and Android integration, encountered several financial management issues:
- Inaccurate books: Hours were spent checking and correcting financial inaccuracies.
- Limited visibility: Lack of insight into COGS hindered product launches and pricing decisions.
- Missed tax deductions: Previous bookkeeping services failed to identify potential tax savings.
- Poor cash flow management: Difficulty in creating projections, such as a 13-week cash-flow forecast.
- Absence of real-time reports: Limited ability to monitor performance effectively.
The solution
To address these challenges, The Magic Brand implemented Finaloop and engaged a fractional CFO:
- Finaloop onboarding: Set up in 10 minutes, with full-year financial reports available within 24 hours.
- Efficient bookkeeping: Books closed within 15 minutes each month.
- Maximized tax deductions: Used Finaloop’s ecommerce expertise to identify and secure tax savings.
- Improved financial visibility: Clear insights into cash flow, COGS, and profitability.
- Fractional CFO partnership: A CPA was brought in to optimize inventory, cash flow, pricing strategies, and product launches using real-time financial data.
Financial stack
- Finaloop for bookkeeping and accounting
- Founder-led financial operations
- Fractional CFO for strategic financial planning and analysis
Results
In Finaloop’s published Magic Brand case study, the company reported these results from its work with Finaloop and a fractional chief financial officer:
- Time savings: Reduced bookkeeping and financial tasks by 92%.
- Reported tax savings: Finaloop says the company saved $60,000 through identified deductions and a revised tax structure. The figure appears in Finaloop’s original case study.
- Profitability improvement: Achieved an 11.6% increase in profitability quarter over quarter.
- Product launches: Successfully launched four new products with optimized pricing and discounts.
Results reported by Tabs Chocolate and The Magic Brand
| Measure | Tabs Chocolate | The Magic Brand |
|---|---|---|
| Profitability and sales | Net profit rose 9.4%; monthly sales grew more than 15% | Profitability improved 11.6% quarter over quarter; $60,000 in identified tax savings |
| Time saved | More than 7 hours per month on administrative work | 92% less time spent on bookkeeping and financial tasks |
| Operational changes | Clearer visibility into discounts, product margins and creator spending | Updated pricing, financial forecasts and four product launches |
See the original Tabs Chocolate case study and The Magic Brand case study for the companies’ accounts.
What a fragmented order looks like in the books
Take one illustrative order placed on a retailer’s website. The customer is charged $120, receives a $20 partial refund, and the payment processor retains $3 in fees. The product’s recorded cost of goods sold is $55. To keep the reconciliation example simple, assume there are no taxes, shipping charges or other adjustments.
| Record | What the system sees | What finance needs to connect |
|---|---|---|
| Ecommerce storefront | $120 order and a $20 partial refund | $100 in net sales for this order |
| Payment processor | $120 collected, $20 refunded and $3 in fees | $97 expected cash settlement |
| Inventory system | One product shipped with $55 recorded cost | Recognize the related cost of goods sold |
| Accounting ledger | Sales, refund, fee, inventory cost and bank deposit | Reconcile the $97 payout and calculate the order contribution |
In this simplified example, net sales are $100 and the product cost is $55, leaving $45 before processing fees. After the $3 fee, the order contributes $42 before other expenses. A team looking only at the $97 bank deposit could miss what happened to revenue, product costs and refunds.
That is why connected ecommerce finance systems need more than a bank feed. The storefront, processor, inventory records and ledger must agree on the order, even when refunds or settlements arrive on different dates.
How ecommerce brands connect their financial systems
The right setup depends on where the disconnect occurs. Some businesses need stronger integrations between existing tools; others need a platform that handles sales, inventory costing and bookkeeping together.
The options below solve different parts of that problem.
Accounting software and integrations
Accounting software like QuickBooks and Xero are popular choices for managing finances. However, their primary limitations for some multichannel ecommerce brands include:
- Integration gaps: These systems are not always designed to connect easily with every essential ecommerce platform. That can leave teams doing manual data entry and reconciliation.
- Limited real-time capabilities: They may not provide the level of real-time financial insight a team needs for timely business decisions.
- Scalability issues: As ecommerce businesses grow, the complexity and volume of transactions can overwhelm a setup built around disconnected tools.
What Finaloop brings into one workflow
1. Integrated system
Finaloop combines inventory management and bookkeeping in one system, positioning it as an alternative to traditional software and manual processes.
Key features:
- Real-time inventory management: Tracks inventory and COGS across supported ecommerce channels.
- Accurate financial reporting: Provides up-to-date P&L, balance sheet, and cash-flow reporting.
- Centralized data: Consolidates financial and inventory data from multiple sales channels for reporting and decision-making.
2. Seamless integrations
Finaloop integrates with ecommerce platforms, payment systems, and financial tools through API connections.
- Automated data syncing: Helps keep sales channels, inventory systems, and financial records aligned and reduces manual data entry.
- Enhanced accuracy: Timely synchronization can improve the accuracy of financial reports by aligning sales data with accounting records.
ERP and cloud accounting alternatives
1. ERP systems
NetSuite: An ERP system that offers a unified platform for finance, inventory, and order management. It is designed to scale with growing business needs, with features such as demand planning, procurement, and multi-currency management.
SAP Business One: For small to midsize businesses, this ERP system provides tools for managing finances, operations, and customers. It supports real-time analytics, business intelligence, and customizable reporting.
Microsoft Dynamics 365: Integrates ERP and CRM capabilities. It allows ecommerce businesses to manage operations, from sales and customer service to finance and supply chain, within a single platform.
2. Cloud-based solutions
QuickBooks Online: Features invoicing, expense tracking, and financial reporting. It integrates with various third-party apps but may require additional tools to manage inventory and sales data effectively.
Xero: Offers similar core capabilities, with a focus on bank reconciliation and real-time financial monitoring. Its ecosystem includes a wide range of add-ons and integrations for more comprehensive ecommerce management.
3. Automated reconciliation tools
BlackLine: A platform for automating reconciliation and financial-close processes. It helps ecommerce businesses with account reconciliation, transaction matching, and intercompany accounting.
ReconArt: Offers reconciliation capabilities including bank reconciliation, credit-card reconciliation, and high-volume transaction matching.
What financial integration can improve
1. Improved data accuracy
By centralizing data from different platforms, these systems reduce the risk of discrepancies and support more consistent financial reporting.
2. Real-time insights
Integrated systems provide up-to-date financial information so businesses can make informed decisions quickly.
3. Streamlined operations
Automation of financial processes minimizes manual intervention to free up time and resources.
How to choose and implement a connected financial setup
1. Assess your needs and goals
Start with the transactions your finance team struggles to reconcile. Map sales channels, payment processors, refunds, inventory movements and reporting requirements before looking at vendor demonstrations.
2. Use integrated platforms
Ask each vendor to show how a real order moves from the storefront through payment settlement, inventory costing and the general ledger. Confirm which connections are native, which need middleware and how exceptions are handled.
3. Invest in training and support
Assign owners for failed integrations, refunds, inventory discrepancies and month-end reconciliation. Make sure finance staff can explain where to investigate each exception.
4. Regularly review and update systems
Review recurring reconciliation adjustments after implementation. If the team keeps correcting the same transaction manually, investigate the underlying mapping or integration.
5. Collaborate with experts
Bring the bookkeeper or finance lead into the software evaluation. They should test the reports and trace sample transactions before the company migrates historical data.
For more on how online stores, marketplaces and physical channels can fit together, read my comparison of omnichannel and multichannel retail.
What to check before changing financial systems
Map everywhere your team records sales, refunds, stock movements, payment fees and expenses. Identify which records need reconciling, which applications require integrations, and who will investigate exceptions.
For a brand selling through its own store, marketplaces and wholesale channels, check whether a shortlisted system can show channel-level margins and cost of goods sold for the products you sell. Ask to see the reconciliation workflow, migration plan, reporting access, support arrangement and full ongoing cost.
