Financial Review & Audit Findings
E-Commerce Group A & E-Commerce Group B
01 — Critical Finding
$1.9M Revenue Underreporting Discovered
E-Commerce Group A Corrected NOI
$1,048,760
After reclassifying sales debits
E-Commerce Group B Uncorrected
($480,869)
Net Operating Loss
Turnaround Opportunity
$1.9M
Revenue correction potential
Avg Break-Even
$449,593
Per month
Avg Freight Ratio
11.14%
$11.14 per $100 sold
Critical Finding: The bookkeeping team is incorrectly debiting the Sales account for inbound/receivable entries instead of Trade Receivables. This "double-hits" the P&L, fails to recognize full revenue earned, and fails to record the asset on the Balance Sheet. E-Commerce Group B is currently underreporting revenue by approximately $1.9 Million.
02 — Revenue Recognition Error
Wrong Method Undermines Financial Health
E-Commerce Group A (Corrected) Net Operating Income
After reclassifying sales debits
E-Commerce Group B vs E-Commerce Group A Comparison
Impact of correction methodology
Solution: E-Commerce Group B must adopt the E-Commerce Group A model of debiting Accounts Receivable for weekly Amazon totals. This will immediately flip their P&L from a loss to a million-dollar profit, matching the reality of their operations. The error is not in business performance — it is in the accounting methodology.
03 — Additional Error Detected
Sales Return Recording Mismatch
Sales Return Error: The sales return and allowance recorded in ODOO was $17,253.53 for January 2026, but it was wrongly recorded as $17,523.50 in E-Commerce Group B books — a difference of $269.97. While small in isolation, this pattern of recording errors across multiple line items compounds the financial misstatement.
04 — Freight to Sales Ratio
$11.14 Per $100 Spent on Fulfillment
Avg Freight Ratio
11.14%
$11.14 per $100 sold
Peak Month (Sep)
18.11%
$18.11 per $100 sold
July Ratio
17.23%
Second highest month
Best Recovery (Nov)
62.6%
Freight income recovered
Freight Cost % of Sales
Monthly ratio — 5 selected months
Freight Income Recovery %
What % of freight cost was recovered via charging customers
| Month | Merch Sales | Freight Cost | Cost % | Freight Income | Recovery % |
|---|---|---|---|---|---|
| Jan-25 | $818,638 | $84,910 | 10.37% | $28,644 | 33.7% |
| Apr-25 | $1,045,884 | $86,337 | 8.25% | $28,272 | 32.7% |
| Jul-25 | $844,861 | $145,570 | 17.23% | $43,213 | 29.7% |
| Sep-25 | $767,813 | $139,045 | 18.11% | $39,240 | 28.2% |
| Nov-25 | $727,457 | $99,145 | 13.63% | $62,053 | 62.6% |
High-Risk Months: September 2025 saw sales drop by ~10%, but freight ratio hit its peak at 18.1% — profit leakage. November sales were down with freight ratio at 13.6%, but freight income recovery was strong at 62.6%. The three high-risk months (Jul, Sep, Nov) need operational review.
05 — Break-Even Analysis
Margin of Safety
Revenue vs Break-Even — E-Commerce Group A (2025)
Monthly break-even: $449,593 | 10 of 12 months in Profit Zone
Financial Resilience: E-Commerce Group A consistently operates well above its break-even point, except for slight dips into the Loss Zone in March and September (likely due to seasonal spikes in fixed expenses or COGS). The margin of safety demonstrates the company's operational stability post-correction.
06 — Dollar Breakdown
Where Every Dollar Goes
Revenue Dollar Allocation
Cost structure visualization
Monthly Revenue Distribution
COGS, Variable, Fixed, and Net Profit
07 — Summary
A $1.9 Million Turnaround Opportunity
The Core Issue: The primary finding of this review is a massive discrepancy between the reported performance of E-Commerce Group A and E-Commerce Group B. While both companies share similar sales channels, the bookkeeping methodology used for E-Commerce Group B has resulted in a severe understatement of its financial health.
The Opportunity: Correcting E-Commerce Group B's books to match the E-Commerce Group A standard reframes the current "loss" as a $1.9 Million turnaround opportunity. Strong revenue, healthy profit margins, clear break-even target, and high operating leverage indicate significant potential for future growth.