How Outsourced Accounting Positioned Epic Water Filters for Efficiency
Diving Into the Waters of Entrepreneurship
Starting a business isn’t for the faint of heart, but Ash Heather decided to dive right in when he began Epic Water Filters (Epic), a line of water filtration systems. As Epic grew it became obvious Ash could no longer properly address Epic’s accounting functions while also meeting the demands of a growing company.
In reaching out to Simple Startup, Ash opened up his schedule to focus on strategy and unwittingly gained a true business partner that would provide strategic recommendations to make way for more informed business decisions for years to come.
Come Hell or High Water
About the Client
You’re at the beach. You can hear the rhythmic sound of waves, fresh air fills your lungs, sand squishes between your toes and there are loads of plastic bottles underfoot. This serene beach vision gone awry is what gave Ash the idea to found Epic Water Filters in 2015.
Ash knew there had to be a way to reduce single-use plastic, and increase access to clean water and was prepared to help by starting an ecommerce business that would cross the need for bottled water off grocery lists for good! There was just one problem. When he started Epic he had no experience in ecommerce and was admittedly naive about building a sustainable business model so he could be the change he wished to see in the world.
Good Accounting Has a Ripple Effect
When Ash founded Epic, he managed QuickBooks on his own but often neglected it because of high demands on his time. He began talking to Simple Startup to clean his books and create monthly reporting so Ash could use his numbers to analyze Epic’s performance and make informed decisions.
Once QuickBooks was expertly managed, it became apparent to Simple Startup that Epic lacked scalable systems and struggled with an inefficient use of working capital.
Doing the Accounting Himself
Epic began to grow by leaps and bounds, but this also meant that Ash’s already limited time available to spend on accounting was being cut short in favor of business expansion. Though this growth was a dream come true Ash was feeling immense pressure to do it all.
No Systems for Scale
Fast-paced growth meant Epic needed to keep more stock on hand. But the question became what is the right amount of inventory to keep on hand?
High Cash Consumption
Like most retail businesses there’s a delay between purchasing stock from suppliers and when a customer sale occurs. This delay kept valuable cash flow tied up in stock.
Simple Changes to Boost Cash Flow
Excited to tackle Epic’s accounting clean up, Simple Startup was ready to get to work building accounting processes and scrutinizing how the business was functioning to identify actionable recommendations for efficiency.
The Solution to Problem 1: Don’t Try to Do Everything
At the rate Epic was growing, something had to give so Ash could focus on growth and not drown in backlogged accounting. Simple Startup was able to clean Epic’s books and take over accounting processes taking immense pressure and responsibility off Ash’s shoulders. As is typical of many startup founders, they try to do everything, and when they finally outsource functions like accounting they wish they’d done it sooner!
In the words of Epic’s Founder, “At first clean books were our initial objective, along with consistency in processes. Then it became monthly reporting. The management reports from Simple Startup were very handy to me, so I could look at various KPIs and ratios and analyze the business more regularly.”
The Solution to Problem 2: What’s an Inventory & Logistics Business Without Inventory Management?
With clean books came a better understanding of a flawed approach to inventory turnover and days of inventory on hand that led to higher than needed cash outlays. Being an ecommerce business, Epic is essentially an inventory and logistics business so it was crucial to find the right balance of inventory to keep on hand.
Simple Startup helped Epic to build a more profitable approach to inventory management by integrating and mapping their selected inventory management system, TradeGecko, with QuickBooks. This newly implemented program allowed Epic to take their days of inventory on hand from 370 to 120 days by ordering less and more frequently and resulted in a reduction in Epic’s cash needs.
Though there are a number of inventory management systems on the market, TradeGecko was the right fit for Epic because it integrated well with Amazon and their websites while also giving them visibility into their inventory numbers so they could make better decisions around how to properly manage cash. The increase in cash flow the system afforded Epic (shhh – undisclosed but substantial amount) allowed them to invest more in marketing across the world to thereby increase their sales reach to 25+ countries thereby speeding up their path to profitability and enhancing their return to investor capital.
The Solution to Problem 3: A Simple Change in Terms is a Big Win
In addition to Epic’s newfound inventory efficiencies, Simple Startup encouraged Epic to have conversations with suppliers to negotiate better payment terms while also keeping their good relationship intact and ultimately taking net 15 terms to net 45 terms over a 12 month period. This simple change in payment terms freed up cash on hand by 20% over those 12 months making more room to allocate cash to global expansion.
A Life Preserver
Progress and Results
When asked about what outsourcing meant to Ash he said, “When I started Epic I had no experience in ecommerce, so I didn’t know what I was doing when it came to building a profitable business. To be honest, I was very naive, my only real objective was to get people to not buy bottled water and to boost access to clean water. I quickly realized I needed the business to be profitable, not hugely so, but enough to ensure the business could survive. Simple Startup helped us run Epic like a profitable business which brought us to the point where we could make business decisions based on numbers I could trust and that was hugely beneficial.”
After solving initial accounting objectives Epic was able to 1) gain more visibility into their inventory boosting their access to cash on hand, 2) decrease large outlays of cash, and 3) use their boosted cash reserves on growth initiatives like marketing, global reach, and new product development.
As a team of 6, building efficiencies into Epic to expand the impact of a small team and push towards expansion goals and impacting real-world change means everything. Epic is now selling in more than 25+ countries and still expanding!
Is your accounting partner an actual partner in your business helping you to change the world or do they simply manage your books?
Changing the world is important and doesn’t leave much time to focus on anything else. Why not let yourself focus on the world and let us help you with your accounting and financial strategy?
Book time with us here and we’ll sort out the rest, so you can relax and focus on your passion.