Whether an ecommerce retailer is contemplating a merger, a SaaS startup is gearing up for an influx of investment, or either simply undergoing periodic internal reviews, due diligence is an important step. It provides a detailed understanding of a company’s financial status, operational robustness, regulatory compliance, and potential vulnerabilities.
More than just a box-ticking exercise, due diligence is a critical factor in making informed, strategic decisions that can significantly impact a company’s future: valuations, partnership discussions, vendor selection, and even preparation for going public. And they do, if the accounting side is handled correctly.
Let’s delve into the multifaceted role of due diligence in the ecommerce and SaaS sectors, and explore how smart accounting software like Synder can help you organize accounting data for a smooth due diligence process.
What accounting challenges usually accompany due diligence
During the due diligence process, accounting and bookkeeping professionals face different scenarios based on the type of due diligence (financial, tax, or payroll, etc.) and reports required.
When a company undergoes an audit, auditors may request various financial reports from your accounting system, typically one of those is Profit and Loss (P&L) or Balance Sheet. These reports are then compared with the primary data source, like a payment platform or bank records. For instance, they may ask for your QuickBooks P&L and access to your Amazon reports. This means your QuickBooks must be accurate, reconciled, and consistent with the non-editable information from Amazon. This is when potential issues can arise.
Incorrect reconciliation in the accounting platform
It’s not an uncommon scenario for ecommerce and SaaS businesses to discover accounting discrepancies during the preparation for a due diligence audit. Frequently, they realize they’ve been reconciling their books without factoring in gross sales and the fees associated with the platforms they have in use. What this means is that they’ve been entering net income amounts from their payment platform and reconciling them against the bank only. This oversight can result in inaccurate reconciliation outcomes, leaving businesses in the dark about their true gross income and fees – critical pieces of financial information which are paramount for easy due diligence.
Let’s consider an example here. Users paid $1000 for the product, and a payment processor (Amazon, Shopify, Stripe etc.) processed their payment and took its commission of $29. So only the net amount of $971 hit the bank account. If only the $971 was booked as a revenue, then the revenue is already understated. If you’re doing the same with each sale, the difference between your sales figures in the books and in the payment processor grows bigger.
The correct way in this case is to book both the gross sales amount ($1000) and fee as an expense ($29). Then the correct net amount will be ready for reconciliation with the bank ($971), and the income will show correct figures.
Absence of a reliable accounting solution
Another issue, often encountered by younger businesses, is the absence of a dependable accounting system holding comprehensive data. Instead, they find themselves grappling with heaps of historical transactions and fragmented information scattered across different places. Challenges abound, including limitations on historical data, a high volume of transactions, and insufficient detail. As a result, these businesses devote an immense amount of time searching for a solution that could potentially fit their circumstances. What aggravates the situation is that they have to transfer years of data into this solution, which is extremely time-consuming and error-prone if done manually.
Thankfully, there’s a solution that can address these challenges head-on.
How Synder helps businesses get ready for due diligence
Synder, an effective accounting tool tailored for ecommerce and SaaS businesses, simplifies the due diligence process like never before. By seamlessly integrating all their sales channels, payment platforms, and accounting systems, Synder ensures the first and most crucial step towards streamlined due diligence – accuracy of data in the financial records right from the start.
Getting flawless books from scratch
Synder is a go-to platform for ecommerce and SaaS businesses and accounting professionals who are looking for a reliable accounting solution. No matter why you’d like to start your books from scratch, whether you’re new to bookkeeping automation, messed up your books to the point where you need to start fresh, or your audit requires a deeper level of details, Synder’s got you covered.
Connect all your sales channels and payment gateways to your accounting via Synder Sync and get all your data recorded in your accounting system. No matter how far back you’d like to go with your historical data, your books will only be limited by your payment processor. Synder’s got no cap on historical data import.
If you’re not satisfied with the sync results, you can use Synder’s Roll Back function and safely delete all the faulty transactions from your books and resync them with the correct settings.
Due diligence level of precision with two data sync modes
Being a robust tool, Synder offers two varieties of synchronizing data that address different needs of businesses, helping them find what’s best for their accounting and get ready for due diligence.
Per Transaction sync for detailed transaction records
It’s traditionally considered that the more granular data you have in your financial records, the more equipped you are for due diligence, mostly due to the transparency detailed information provides. Some audits may just require a higher level of details to provide more transparency. If this is what you’ve been going for, the best option for you is to choose Synder’s Per Transaction sync mode.
The Per Transaction sync mode allows to meticulously record transaction details such as sales, discounts, fees, customer, tax and product details, in your accounting. Come due diligence time, each sale is ready for an audit.
Daily Summary sync for daily summarized transactions
While meticulous transaction records are good, they’re not the only option for due diligence. For businesses or clients handling a significant number of transactions, having overly detailed data might not come in handy or practical. In such instances, Synder’s Daily Summary sync mode serves as an ideal solution. This mode aggregates and posts daily transaction summaries for each connected platform, providing an overview of sales, fees, discounts, etc.
Rather than documenting each individual transaction, this approach focuses on platform-level summaries, ensuring your accounting system remains uncluttered and efficient. It’s a smart strategy to prevent potential system overloads without compromising on the visibility of important financial data.
Either mode of data synchronization will guarantee accurate record of transactions with no duplicates, which will help you achieve up-to-date and reconciled books.
Accurate P&L and Balance Sheet
By ensuring correct data recording in your accounting system with Synder, you pave the way for impeccable financial reporting. After the setup, your P&L statement will have the desired level of detail, covering all critical income categories, including fees, and expenses.
Moreover, a precise Balance Sheet is guaranteed as Synder uses a clearing account to accurately mirror the cash flow from your payment gateway. Invoices are duly closed and synchronized with their respective payment dates as soon as the transactions are completed.
At this point, all your transactions, inclusive of fees, are duly recorded and accounted for. Your financial reports are precise and up-to-date, and your accrual-based accounting is fully primed for the due diligence process.
Achieving effective due diligence and optimizing the way accounting data is organized
There’s no more need to turn the crucial process of due diligence, which involves thorough examination of a company’s financial health and potential risks, into an uphill battle. Proper accounting practices and the right tool like Synder make due diligence for ecommerce and SaaS businesses and accounting professionals serving them a streamlined and efficient process.
Synder provides an avenue for ecommerce and SaaS businesses to connect all their sales channels and payment platforms to their accounting systems. Whether you’re starting your books from scratch or looking to improve the existing ones, Synder ensures that your records are accurate and complete. With its robust data synchronization modes, Synder offers tailored solutions to businesses, irrespective of their transaction volume or level of detail needed.
Furthermore, the precision offered by Synder guarantees accurate P&L statements and Balance Sheets, reflecting the true financial health of your business. By taking care of your transaction records, including often overlooked details like fees, Synder ensures your financial reports are up-to-date and matching, which means your accounting is ready for due diligence.
Ultimately, the road to effective due diligence is paved with robust, meticulous accounting practices. By leveraging powerful accounting solutions like Synder, accounting and bookkeeping professionals can not only streamline their accounting process but also empower themselves and their clients’ businesses with the confidence to navigate due diligence effortlessly.
Explore Synder’s functionality by signing up for a 15-day free trial, or book a seat at our webinar to ask questions and discover what the tool can do for your accounting practice. Connect your platforms, configure the settings and get a single source of truth for your transactions data ready for easy reconciliation and hassle-free due diligence!
