What's up, DTC Pod? Today we're joined by Leo Ponchevsky, who is the founder and CEO of Final Loop. So, Leo, I'll let you kick us off. Why don't you tell us a little bit about your background and what you guys are building at Final Loop.

Hey, guys, thank you very much for hosting me. So we build basically everything around the pain that every ecommerce brand owner has, which is managing the bookkeeping in a way that can keep pace with an ecommerce business. Traditional bookkeeping was not meant for ecommerce, and throughout the years, many people tried to make patches, basically connect the store with QuickBooks and connect the banks and the different integration and the ecommerce loan providers. So a lot of patches, and it never worked. Traditional bookkeeping just doesn't fit the pace of an ecommerce business. So we decided to rebuild it. We provide real time bookkeeping service specifically tailored to DTC and Ecommerce brands, which basically means that we replace the accounting system, whether it's QuickBooks or Zero or Netsuite. We provide all the different integrations that you need in order to manage your bookkeeping, and then we replace also the bookkeeper. So brands that are using us don't have to hire a bookkeeper. We cover the entire process end to end and basically give you real time numbers, solid numbers, 100% accurate numbers all the time. No month end reconciliation, no reconciliation at all. Everything is true 100% of the time. So people can actually make decisions. They can actually trust the numbers that they see, and they can be data driven instead of just making gut feeling decisions. We also very soon cover the entire IMS portion of the business, basically the inventory management system, which would be the first overall solution between accounting and inventory management specifically for DTC brands.

So, yeah, I'm very excited to get really deeper into the product and talk about not only some of the features you guys have, but also your take on inventory versus accounting, how they tie together, how you guys productize that. But I'd love to before we dive too far into product stuff, let's talk a little bit about your background, what's your personal background and what have you done before starting final loop and what was kind of the inspiration to get you started to build this as your own company?

Yeah, so I have quite an interesting background, I'd say, in terms of where I am today. So I started as an accountant and a lawyer. I studied accounting and law in law school, practiced quite a few years in international tax MNA, basically cross border transactions for very large enterprises, mainly on the tech and pharmaceutical industries. So I worked for many years with PwC, the Big Four accounting firm. Started very young, ended as a partner in the international tax practice, half of my time in Tel Aviv, half of my time in New York. And I always had different side hustles, I'd say. So, at the beginning, I used to teach tax and accounting classes in the university. I started a few small businesses, some of them traditional, some of them more on the tech side. One of the businesses that I started is actually a DTC brand. And the DTC brand was a nice combination between a product and a service, basically a company in the fertility space that help people preserve fertility from home instead of going to a clinic or a sperm bank. So it's all about DTC in the front. So people order everything through an online website and then service at the back end, because everything is sent to a fertility center where the samples are getting tested and stored if they want. And throughout this experience, basically my accounting tax load background got combined with the DTC ecosystem, the Ecommerce ecosystem. I was able to see the great explosion of this space even, regardless Corona, and before Corona, just so like how many great brands are created, how vibrant this ecosystem is. And then I noticed and basically felt with my brand as well, that there is no great financial solution and to say the least, great people just going from different outsourced service providers, trying to find a bookkeeper, go to upwork, try this software, that software. But the bottom line, you never have numbers, you don't never have your financials, and they are always delayed, they always have tons of mistakes. And then the opportunity was right there. I didn't have much tech experience except for one small business that I sold for nothing. It was a location based restaurant offer, but not intensive tech experience, but I just couldn't ignore the big opportunity of combining, I'd say, the traditional word of accounting finance tax into the progressing word of DTC. And this is basically how Finalup was born. 100%. My own pain running my DTC brand myself.

Yeah, and I think that's where a lot of the best companies are started. It's like when you have a specific insight and then you apply that insight to a pain that you've been working on, then you can kind of merge the two and build out a solution. And a lot of times if you scratch your own niche, you're going to help out a lot of other people as well. So the next thing I'd like to talk about just regarding this sort of space is what were some of those light bulb moments for you when you were like because you obviously understood everything from an accounting perspective. And then you were running your D to C services sort of operation. What was the process before? Right. Without a service like Final loop, what are you doing?

So let's make a bit of an order on how financial operations of a DTC brand are basically look like, because people sometimes confuse the different functions. So at the end of the day, you need financials. And you need financials because you want to borrow a loan, you want to raise money, you need to file your taxes, you need to pay estimates. So you have to have financials at some point. The way to produce financial statements or books is to use an accounting system and to hire somebody that would work on the accounting system. The accounting system is never on autopilot. You need an actual person to work on it. I think two, three years ago, I saw many founders trying to deal with it by themselves, which is, in my opinion, not a smart way to manage your business. Because as a founder, every minute that you invest in the business and in sales and marketing and things like that, it's times more important than doing bookkeeping. My dad used to like doing his own bookkeeping, but it's really not recommended. So you need to hire a person to do that. Sometimes you go to to an outsourced firm, sometimes you just get a freelancer. Sometimes you hire a part time person internally. But you need somebody to work on the books who is the bookkeeper. Then you have two more people in the loop. One is the Tax EPA, the person that is going to file your taxes, which is not necessarily the same person that manages the books. And then as the brand grows, you would hire probably a CFO or a fractional CFO. So this would be the person that would use the books and use the financial statements to help you manage your financial health better, make projections, understand your budget, cut on costs, strategize fundraising round. So this would be the CFO. Each function is a bit different now basically, the bookkeeping process is the first two functions that I spoke about. It would be choosing software on which your financials are going to run, and then second, hire this person that would run it in a decent way, in a way that you can trust the financials. So this would be basically the setup that you would have. And based on the books, you as a business founder can make decisions and understand what you're doing and understand your profitability and you understand what's the next steps in terms of your financial health that are recommended for you and for your business.

Yeah, there's a lot to unpack in each one of those phases, and especially for Ecommerce businesses where the cash flow is so hard to manage, it's absolutely critical. So if we go back to the first phase where you mentioned that you have to hire someone, what do you have to say to Ecommerce founders that say, well, we could use QuickBooks? What's broken with using QuickBooks, for example, compared to final?

So, as you said, and that was my experience as well, and ties back to the previous question. Basically, you go and find a bookkeeper, and the bookkeeper would usually bring in the accounting software. But my experience was I moved with my business probably six bookkeepers, because I went to the first one and the first one started to ask me questions. And after five minutes, I understood that this guy has no clue how Ecommerce business is operating. And then I moved to the second one. It was much nicer, but he didn't get Ecommerce and the books were always full of mistakes. So you went from one bookkeeper to another bookkeeper, and you never get decent books, you never get your numbers. Everything is in delay, everything is you need to always chase, did you close my books? Yes, I closed my books. But then I find ten mistakes. So, yeah, we need more time. But you end up with no financials. So you need to find this bookkeeper who can work fast, understand Ecommerce, and can process tons of transactions in a correct way, where most of the ecommerce integrations are hacked by other integrations. Right. If you go to Shopify today and you want to understand the sales, you have 20 apps, returns apps, discount apps, many apps that would go to the shopify API and tweak it so they can provide their service. At the end of the day, the human being needs to get all this information and manage it in a way that would give any benefit to the business, and they just can't do it. So you go to this person, they're trying to manage your books, they're bringing the accounting software. Ramon, you mentioned QuickBooks, but QuickBooks zero nets with all these guys, depending on how large is your ecommerce brand would be relevant. However, these are cars and you need a driver. Now, the driver is the main thing here. The car is the software that they use, but also the car is not an ecommerce car. Both QuickBooks zero netsuite are basically a ledger. You throw in information and then you need somebody here to arrange the information. But it's a generic ledger, it's not meant and it's not built for ecommerce. So you need to start bringing in different integrations and what you get is a generic software that your lawyer uses and your accountant user uses and the nonprofit uses, and it's just not tailored or meant or built for ecommerce.

Yeah, I mean, I've had my share of experience where you have the person, you have the tools like QuickBooks and everything, and yet I personally still would have to categorize stuff month after month. I'm like, this is the same stuff I've already had to categorize. And as a founder, you have 20,000 things to deal with on a daily basis. Another thing I'd like to unpack here is and just to help out founders that might be going through this, the other existing alternative is when you get a big accounting firm that say, we will cover everything, we'll do the bookkeeping, we'll do the accounting, we'll get you a fractional CFO, and we will do the financial projections. And I've been in those shoes myself. And the danger with that could be that then you're locked in. Then you don't want to just switch your bookkeeping because then they say, well, we're doing your accounting, we're doing your projections. And if you try to change one thing within there, everything sort of breaks. You're a founder, you're super busy to switch systems. So I'm just a little bit curious now to know how would life look like for a founder if they were to start with final loop from the very beginning compared to using these integrated systems.

Yeah, it's an actually great question and with your permission, I want to talk yeah, do about then the second part. So, first of all, as a matter of fact, we have hundreds of brands that worked with outsourced accounting firms that provided them the entire service bookkeeping, CFO services, and tax services. And they moved to final loop for their bookkeeping. And the same team that they used are now leveraging final loop. And they're super happy. They may lose the bookkeeping work, but I'll tell you a secret, even for these firms, the bookkeeping work is usually a loss making part of the business that is just meant to cross finance the more profitable part of the business, which is the CFO and the taxes. So even these firms end up being very happy because they cut a loss making line of business for them. And now they can use us to provide the more high value services to the brands. The brands are super happy because they get real time data and they're super happy because all of a sudden they can actually get added value stuff from these firms because what actually happened you hire a firm to do three things and most of the time they're struggling with the bookkeeping. So you pay a CFO level of fees and you are getting a bookkeeping service by smart people. The problem with smart people doing bookkeeping is that it's not about being smart or not smart, it's just that even if you take the smartest people on Earth, they would struggle processing such an intensive amount of information that the ecommerce different tools contain. So even the smartest person cannot manage books in a proper way. So even when you have this all inclusive setup, we see brands shifting to final loop and then everybody is just happier afterwards. Sorry, I forgot the first question. One way is to go to people that are already in outsourced and I think that you ask what if you don't have the outsourced firm? Then what's the stack that you'd have? Then it becomes really simple. You can use us as your accounting software, as your bookkeeper with all the integrations included. Then the only thing that you need to bring on board is a CFO and a tax person. Some CFOs would also do the tax. We can do the tax as well. It's something that we do in order to help brands put everything under one roof. But we also work with a lot of tax CPAs. So you would use final loop for your bookkeeping end to end and then you would bring a CFO that would provide you insight based on the data, based on the real time data. This is going to be the best stock because we would cost you pretty much, I would say between 40% to 50% of what you would pay in traditional bookkeeping. So you have savings right there and then the CFO would actually provide you value because they have the numbers that they need in order to provide this value. So it's a win win for everybody.

So it seems like one of the main opportunities that you were really productizing was the fact that traditional accountants have a certain way of doing business. They serve a lot of different businesses. You guys were able to not only specialize down into ecommerce, but leverage all the different points of connection in that specific landscape. So all the APIs that Shopify provides, as well as the other marketplaces where payments are flowing from and all these different things, to build a software solution to specifically support this ecosystem. Does that kind of sound accurate for what the opportunity was? Kind of move away from just saying, oh, let's offload all the manual work we can and productize it into SaaS because we have all these available data connectors instead of just like jerry rigging our own system into something like a traditional QuickBooks or something like that and building an agency, right?

Yes, exactly. We figured out that if we use any of the existing solution, we would just make another patch on fundamentals or infrastructure that is not meant for Ecommerce. So we basically built a vertical product. We built a vertical product in a vertical that I know very closely because of my business. And we built a vertical product in a space that has many tax savvy people. The Ecommerce founders are early adopters in nature. They are probably the first ones that would say, I understand that I can use a SaaS product in replacement for my old stock and my bookkeeper. And we built everything around the third branch is Ecommerce is probably one of the only places yet that most of the data is hived up and can be accessed through secure APIs and processes. You wouldn't have the same thing in many other industries. So all the cards say Ecommerce. The approach is a vertical approach. We serve only ecommerce. We don't do anything outside of Ecommerce. We don't do startups, we don't do traditional industries. We don't even do brick and mortar retail, although it's pretty close in nature to Ecommerce. So we are basically the first company that building specifically in the accounting space for Ecommerce. And then the approach is a very tech oriented approach because when you build vertically, you can actually get dip with the tech that you have.

Yeah, and the next question that I have to follow that up is in terms of building this product, right. What was the roadmap? Because every Ecommerce ecommerce businesses are very similar at a structural level. A lot are built on shopify, a lot serve different spaces. But then as they start to grow, they start to get slightly more complex. Right. They sell in different channels. They manage inventory differently. They have different three pls. Some you get data from, some you don't. I'm really interested to know when you started to build your product, what was like the MVP or the 1.0? What did you do at that stage? And then how did you decide what areas of the rest of the Ecommerce stack to start to fold in, to be able to support more and more commerce merchants?

Yeah, it's a super question and it's one of the biggest pain points that we have internally with what we build. And it's very different from many other technology SaaS companies. So as you mentioned, usually in technology you want to build small MVPs starting, you know, start getting feedbacks from the market, then build another layer and another layer and another layer. With us, we're a different animal. We are somewhere between an infrastructure company and a SaaS company. So we built on one side a ledger, a full ledger, and then on the other side, we need to add SAS features to this ledger. This is unique because if you think about bookkeeping, either I do your bookkeeping or I don't do your bookkeeping, and then you need to get a bookkeeper. If I go to a brand and then I tell them, hey, we're going to solve your bookkeeping, but we're going to solve it. 72%. They will tell me, okay, but how do I get the rest? Right? I still need a person to do the rest. So we have this challenge of a very broad MVP before we can be viable just as a benchmark, we raised already almost $20 million. Everything except probably a portion of my salary go to R and D. So we heavily investing in R and D compared to our size. We have a very big team of devs, and we put a lot of effort in the product. So it became the MVP. And as we speak, we are adding more and more features. So I mentioned the inventory, for example. So we started without the inventory management. We basically expect people to use another IMS and then plug the numbers in our system. So it pushed down to the books. But as we grow into a more, I would say classic SaaS company, we add more and more feature. We figured out that people have tremendous pain with their inventory management. So we basically build the first integrated system between accounting and inventory management. So everything is a native system, one native system. So MVP is large. We took us time to finish, but now we have a quite robust software that can serve many brands successfully.

Yeah, and I think that part is really exciting for the types of businesses that really fit the venture model. Right. There's some markets that are massive, and the opportunity is huge. And if you can build that platform layer, which it seems like you guys are really going after, but like you said, the bar, to be able to get there is you need to be able to support all these different use cases before the product is truly viable in the market versus something where it's just a little tool or feature and then you're good to go. So that leads me into my next question, which you kind of brought up around inventory management, right? So what is the link between inventory management bookkeeping? How should brands be thinking about it? What are their current ways of managing their inventory? And what's your experience to date with starting to productize out the inventory side of the picture?

Yeah, so originally when we started, we didn't think that we would need to ever build inventory features within final Loop. We thought that final loop would be a full service accounting solution to replace exactly the software, the bookkeeper, the integrations. You would have everything within our software, and then we can integrate with inventory management system to just bring your inventory and Cogs and SKUs in. What we saw in the past two years is that the fact that accounting is not integrated with inventory is a huge pain for the brands. And even if they use an inventory management system, since it's not connected to the purchases, to the bank transactions, to the different costs that they have, the inventory management system and most of the time is not updated. They don't have the numbers to put in our system. And this number, obviously the Cogs is a crucial number for an ecommerce brand in addition to the marketing spend and the marketing budget and shipping sometimes. So we decided that it's important enough to bring it into our software and started to build the inventory features. We're going to drop we already have a beta version of it. We're going to drop Shopify Real Time Cogs in about a week and a half. Then we're going to get Amazon in, in about three weeks. And I think this is going to be a great news to our users that are I can't express how many requests we get a day for inventory features as well as for supporting Canada because we are only us right now. But for inventory features, this is going to be a great news for our users and I think it would allow us to accept many, many more users that can now benefit from IMS and accounting within the same platform.

That gets really interesting because you can start getting into better and better forecasting with your cost of raw materials. Are you foreseeing a change in inventory prices for the future? What if volume is X? What's going to be the exact profit margin, et cetera? And that's just a tool that just doesn't exist. You have spreadsheets for that and still, even still, not every founder likes opening up the spreadsheet that if they touch one thing, it breaks the whole thing apart. So that's very exciting. What does it look like today specifically for inventory management? Like, how would you use the inventory management tool within Final Loop? I know we don't have a visual demo here, but if I were to interact, what are some of the things I can use it for today? Within inventory?

Yeah. So currently if you think about Final Loop, you're getting PnL, balance sheet, cash flow and KPIs in real time. Everything in real time. If we ask 100 brand owners right now how much money in cash and in profit they did yesterday, 100% would tell you that they don't know. They know roughly how the business is doing. They don't know exactly how it's doing. And the difference in 2023 between roughly and exactly is huge. So the base solution of Final Loop is just to tell you how your business is doing every second. The PnL, the cash flow, the balance sheet, your liabilities, everything. The piece that we missed in order to make it perfect is just the real time Cogs that would be integrated right now. And then when you have the full PnL and you have the Cogs and the Cogs is sourced in the different SKUs, then the next step is to tell you how much profit in real time you make on a certain skew that you are selling. One of the most common pitfalls for brands is that they have 50 SKUs. Ten of them are loss making, 40 of them are profitable and then the profitable cross finance the loss making and they don't even know about it. So the next phase of final loop is taking the PnL, which is real time, split it into line of businesses and then per queue, then we're going to tell you, hey, this is how much you made on this queue last week. This is how much money you made on this queue last year. And maybe you need to shut it down. Maybe you need to change the economics, maybe you need to sell more of this. Maybe your Ross is incorrect because it's based on return on sales. But then when you look per sku, you need to shift budget to other SKUs. So when I talk about inventory, I'm not just talking about how much units you have in stock and where are your stockouts. I think this is, I would say, the simpler part of inventory. It just tell you what your SKUs are really doing, which I think this is basically the most important part because it also interrelated to how you manage your ad spend to where you put your budget, to how much. Sometimes you know that right. If you go on Twitter, you see tons of discussions about Ross and how to calculate Ross and how I shifted this budget from this campaign to that campaign and I boost sales in 25% and sometimes 250%. Right? I think this is not the right way to look at it. I think Ross should be measured by net profit. So you need to go to the net profit and then you set your marketing budget. I think final loop in a few months would let you determine Ross not on a sales or revenue basis, but on a net penny basis minus your salary. So you basically take the profit that you expect. So you also get some salary as a founder and then you plan your marketing budget. And I think this is going to be the next phase of final.

So I think this part is really exciting because I think you're right in terms of the way a lot of people think about business. And with the tools that exist, it's really easy to just look at a shopify dashboard and be like, this is how much money I'm making, when behind the scenes there's so many other things that are going on. I think one key component of that, as you mentioned, is getting down to the sku level. Because not all SKUs are created equal in not only the cogs to produce the good. But then when you factor in return rate on the specific good, the profit margin of that sku, how much it costs to ship that specific item, it might be cheaper to cost to ship a T shirt versus a suitcase or something, right? So there's all these different cogs that go. Into each skew that make up the business. So while you might be like, oh, I had the most profitable day ever, if you're selling something that costs a lot, cost you more to sell it than you may even realize, you're into trouble. One thing that comes to mind is I was speaking with one of the guys that runs operations at Revolt. They're like the massive Etailer. And for him, the way they were thinking about running the business, it's not just about exclusively driving conversion. It's about how do we drive conversion on the items that we want to be selling that have the highest opportunity for profit. Not just if I'm driving massive conversion on an item that's being returned all the time. Well, you know what? I'm paying for those returns. So I think the savvy sort of founders and a big opportunity to unlock is like what you were saying when you're merging the two. Now you really start to get to, okay, what are the inputs of my business that are leading to the most profitability instead of just the most conversion? Because that could go in a whole bunch of different ways.

Yeah, exactly. So if Final Loop phase one was all about you have this burden of doing your bookkeeping, you have this burden of filing your taxes, there is no good way to do it today. We're going to do it for you. We're going to give you the numbers in real time. The next phase is giving you the tools to be a better business owner, a better founder, manage a financially healthier company, which is the things that we are focused on for the next few months.

Leah, one other thing I wanted to talk to you about is just from your vantage point, what are some of the most common pitfalls that founders might fall into? I think I just kind of talked about a couple where people might be not able to track down sales, just the specific input cost, et cetera. But what are some other things? Whether it's around taxes, whether it's around cost of manufacture, whether it's around shipping. From the bookkeeper's point of view, what are some of the opportunities that founders really should be paying attention to to optimize their business and make more profit?

So I think let's start with the high level and go to the low level in the very high level. As a founder, you need to ask yourself whether you understand your profits. And again, I'm repeating this point because it's so important. I roughly know what my business is doing. It's not accurately or the last week or yesterday. Ask yourself these questions as a founder, because you need to know the answer in order to manage a data driven business and make data driven decisions. So first of all, you need to ask yourself how much money I make one profit. Second, cash flow. Right? So you can have a business that is profitable and then you can still be cash flow negative. So after you ask yourself how much money I make on every skew, how much money I make as a company, ask yourself whether I have enough cash to support my growth. If not, then don't grow until you have this money. We see many companies and many DTC brands, they don't understand their cash flow and sometimes confuses cash flow with profits and loss and losses. You can be profitable. Then you make a huge inventory purchase just to finance your growth. All of a sudden, two months after you're out of cash, you are going to raise capital. You're getting squeezed. You don't want to raise capital, you go to get financing. The next pitfall is you need financing. You need financing. Now if you go to the bank, they would tell you, hey, we need these covenants, we need to understand your projections and your financial history and then you need to do a lot of work around that and due diligence and things like that. So you would go to the easier path of getting merchant cash advance and different other line of credits that you can get from ecommerce loan providers. And then I would say the pitfall there is to really understand what you're getting to because some of the providers would tell you, hey, you have this loan for 10%, whereas the effective rate is 30% because you have different terms and conditions to how the loan operates. And then you end up month four in the future saying I'm out of cash, I'm out of cash because I didn't project my cash flow. So profit, cash flow, be reasonable with financing, don't run getting a lot of finances to purchase inventory without understanding what it entails and the cash flow that would be resulting for this financing. So these are, I would say, the three main areas that I see brands struggle with. Then on the tax side, the tax side is a bit different. I think it's all about taking advantage of certain opportunities that you sometimes overlook. I think the DTC space overall leave millions of or hundred millions of taxes on the table. Just examples picking up the wrong entity, right? You have different entities that you can use. You can use an S Corp. You can use an LLC, which is a partnership. You can use a C corporation. Each entity would have certain pros and cons that you need to consider. If you anticipate to exit, you're better off being a C Corp. If you are profitable and you want to save or on self employment taxes, you would pick an S Corp. So there are many different considerations on how to incorporate or move from one incorporation to another incorporation, and then just many deductions and opportunity to save money. Whether it's an accountable plan that can give you a deduction at the level of the company without an income pickup on your individual level, whether it's different local regimes that you can opt in and enjoy benefits and grants, whether it's just a certain deduction or credit that you could have taken advantage of and you didn't know about it. So I think with DTC in terms of taxes, you don't know what you don't know, and you need somebody to tell you this. But if somebody is not an expert in ecommerce, they would not know things that are happening in the ecommerce space which are not relevant to a dental office. So here the recommendation is like, use somebody that has a specific ecommerce experience. On our side, we try to help founders get all the deduction that they can and don't let go opportunities for tax saving or tax opportunities. But we do the same thing with the cost side. So it's not only about the taxes, it's also about just the financials bookkeeping and cost saving.

Yeah, there are so many different levers to pull, and I think that's so interesting. And especially one thing I wanted to go back to, I want to talk a little bit more about tax, but on the entity set up, because I know a lot of founders who are getting started. Think about that. What are most D to C brands set up as? Right, if you're a SaaS company and you're venture back, you're a C Corp. But in the D to C space, right, you start seeing a couple more companies. Maybe they're more environmentally friendly, they're setting up as B Corpse or transitioning to B Corps. You've got Scorpion, you've got C. Corps. You've got LLCs. So what do you typically see and what's the right fit for what sort of business?

Yeah, so most of the brands start as an LLC, so they set up an LLC, which could be the right way of doing things at the beginning. Then as your business grow, you would have, I think, a decision to make between converting into an S Corp. Or as a C Corp. The main advantage of an S Corp. Is the ability to pay yourself part of the compensation through distributions and not through salary. And by doing that, you would save around 16% of self employment tax, which is quite significant. The threshold that you usually recommend to think about is 40 to 50,000. So as you get profitable and you think that you can take a salary of around $40 to $50,000, this is the right time to think about converting to an S Corp. So this would be one option. The second path that founders take is especially for venture backed DTC brands or for brands that believe that in a few years they're going to exit the company. Then we see many people convert to a C Corp. Because you can make the QSBS election, which is basically an election that is only relevant to a C Corp. There's a minimum holding time, but if you meet the minimum holding time, then basically all the capital gained from selling the shares in your business is not subject to tax, which is obviously a huge benefit that people should enjoy.

Amazing. And then on the other side of things, right, so when it comes to taxes, things like write offs, deductions, et cetera, why don't we talk a little bit about that side of the landscape? What do brands do right? For example, like return items, damage items, are they writing them off? Are they reselling them? What are some of the ways that brands can think about optimizing around the tax that they're going to be paying?

Yeah, so our general recommendations to brands is to make money and not make deductions, right? I rather make hundred and pay taxes than losing and take a deduction. So that's probably a general recommendation. Then the second recommendation would be if you lose money or you pay costs, then make sure you pick them up as deductions and don't lose them. And by the way, the fact that final loop is a closed system that is always reconciled basically makes sure that nothing is left behind. But as a general concept, you always want to accelerate deductions, right. And push income if you can. So, for example, if we have a process that before tax time, we have the screen when you review all your invoices and you basically write off open invoices. Because when you issue an invoices, you basically recognize income. And if you don't close it by the end of the year, then you would pay tax this year, and then maybe next year you're going to be in a loss position. But you already financed the tax. So you want to close the invoices. You want to recognize bad debt when you can. You want to, as you said, deduct inventory that is not in use, whether it's low inventory or debt inventory, you want to take advantage of different legit deductions that you can take in the business. So I mentioned Accountable Plan. Accountable Plan, for example, if you get into accountable plan is an agreement that you as an employee of the business, even if you're the founder of the business, can get with the company in which they would cover the company would cover certain deductions, personal deductions that you have. So if you work from home, the company can cover part of your home office expenses, whether it's utilities or Internet or many other expenses, rent, mortgage that you pay on your personal level, travel and some other expenses. Now, the nice thing is that the company would get a deduction and then for you personally it would be an offset so you won't pay tax on the personal level. The company enjoys an entity level deduction. So another opportunity that we see a lot of brands taking right now is there's a new rule on the federal level that for pass through entities such as LLCs and Scorps and partnerships, there's basically a cap on how much state tax you can deduct. And for states like New York and California, this could be a major limitation. You can deduct up to ten K a year of state tax. So if you are resident or you have presence in a high state tax jurisdiction, you can basically deduct the state level tax on the entity level and not on your personal level. The benefit of it is that you are not subject to the ten K limitation, which means that you can take the full deduction, not subject to the ten K based on the local state tax rules. This is a huge benefit. There are some steps that people need to take. Specifically for New York, it's a tricky one. You have six days from now, so it's March 15 to make an election. And the tricky part is that the election is for 2023. So it's a forward looking election. So brand founders in New York, this is the time to make the election. And then you can deduct the state tax and not be subject to the ten K limitation. I can talk another hour of different opportunities, but I would invite people just to sign up to final loop and enjoy all of them instead of hearing this tax technical discussion that no, I love it.

I think it's great. And it's so important, right? Because a lot of these things can really save your business, a whole bunch of headaches and actual money. And like you were saying, they're not always so obvious. So for anyone that's listening, where can they connect with you? Where can they find out more about final loop and save some money?

Yeah, so it's pretty easy. They just go to finalup.com and sign up. We have two weeks free trial. We don't require any credit card, so you can just sign up without any commitment. You would get your first PnL for free, completely for free. In real time. You can experience the system and see if it's a good fit. Then on top of the software, we have a team of experts, which is quite a unique setup, because if you think about traditional accounting firms, you would have a focal point, which is somebody that would answer the questions. We have specific teams in every facet of ecommerce. So we have an inventory team and we have a revenue team, and we have a payroll team and loans team. And each team is composed of the best experts you would find in this area of ecommerce. And it's all about ecommerce. So on top of the software, if you ever have question, you get immediate response by the best experts within 2 hours. So this is a service that you get on top of the software, knowing that many of the founders and even internal finance people are not experts in every part of the business.

No, I think that's it's such a huge offset for businesses and founders to be able to get that not only industry specific software, but as well as the knowledge to all the different components of it. So anyway, just want to thank you for coming on DTC Pod. Had a great time learning a little bit more about tax and finance and bookkeeping and everything that you need as a brand on that side of the house. So we look forward to seeing you guys continue to grow, support more brands. And thanks for coming on the show.

Yeah, Philio, thank you so much for hosting me. Really appreciate it.

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