Day Zero: Revolutionizing Financial Management for E-commerce Brands

Day Zero revolutionizes e-commerce accounting with automated financial systems for streamlined operations.

### Revolutionizing Financial Management for E-commerce: The Day Zero Approach
* 💼 "One of the biggest bottlenecks to raising is actually getting **P financials**," highlighting the critical need for **accurate financial reporting** in business growth.
* 🤖 Day Zero aims to create a **lightweight, AI-automated ERP** specifically designed for e-commerce and consumer packaged goods brands, addressing the **inefficiencies of traditional financial management systems**.
* 📚 The co-founders, Julia Tomov and Michelle Lao, credit their **finance and accounting education from Wharton** as foundational to their approach in building the company and understanding **market needs**.
* 🔄 With a team of nine, Day Zero has been building for a year, focusing on **automating financial processes**, including a general ledger that **integrates seamlessly** with platforms like Shopify and Amazon.
* 📊 Their system automates accrual accounting, providing **daily reconciled financials** and **eliminating the manual entry issues** faced with QuickBooks, which many users find **cumbersome**.
* ✨ Users appreciate the simplicity and user experience of Day Zero, with features that allow for **easy access to updated financial data**, enabling **proactive decision-making**.
* 📈 The founders emphasize the importance of **intentionality in business metrics and growth strategies**, advising brand owners to consult with fractional CFOs for **clear goal-setting**.
* 🔍 Looking ahead, they believe that while QuickBooks will still exist in ten years, it may face **significant competition from innovative startups** like Day Zero that are **reshaping the financial management landscape**.

I also think externally as businesses grow. Obviously, they are interested in either like that or equity financing. And so, I think one of the biggest bottlenecks to raising is actually getting P financials. You know, you talk to an investor, they're like, Okay, great, send me your latest financials. And you're just like, Uh, I didn't have anything since I filed for taxes a couple months ago. Some of the things on our vision board is, you know, one day, instead of just sending Excel sheets or PowerPoints to your investors, you could just give them a day Zero login. [Music] Welcome to Blue Ocean by Startups. Each episode, I sit down with leaders in consumer brand, supply chain, finance, and CX to talk about the problems they're facing and the solutions they're using or building. I hope you enjoy the show. Hey everyone, I'm Charles Cushing, the founder of Startups. With me here today are Julia Tomov and Michelle Lao, co-founders of Day Zero. Welcome, guys. Hey, Charles, great to be here. So, before we begin, I just want to set some context.

what's the online overview for what you guys are trying to build at Day Zero? Sure, at Day Zero, we're focused on building a lightweight, modern AI-automated ERP focused on e-commerce and CPG brands. You met at Wharton. I'm just curious, so apart from being the place that you guys met, how has your B-school education helped or not helped in the process of coming up with this idea and building this company? I think it's influenced everything, actually, in a lot of different aspects. One, from just the finance and accounting side. Obviously, we had that foundation learning that at Penn, you know, on a tactical perspective. And then, on the flip side, we also took a lot of courses around management and business strategy. And so, you know, those software skills, I think, permeate the business today and really help us, you know, in the day-to-day. So, I think it's been super helpful. Yeah, and since we have a business background, we both studied finance and accounting and have worked in investing in our past lives. We

really find it important to have accurate financials. Just understand small business market businesses, what's going on, and especially in today's economic and market climates. It's important to just stay on top of your numbers and set forecasts accordingly for what's about to come. And so, you met actually in undergrad. You both kind of went on to do things in the finance space. Would you mind just saying a little bit about the path that you each took, you know, after graduation, prior to starting this company? We did meet in undergrad, this a school, and then I moved to New York. I spent almost six years as a public and private smart investor at a large asset manager, working in their credit branch. So, I was investing in primarily software and retail companies, so very analogous to what we're working on today in their public capital structures, as well as giving them private loans. You know, obviously deep in the financials every single day, building models, and then looking at underwriting for these businesses. So, very analogous to what

We're working towards today. I'm more of a circular journey. So, after graduation, I started in New York as well in finance. I actually moved out to San Francisco for a few years, where I was part of a private equity firm investing in software and technology businesses. And then after that, I actually worked at an e-commerce aggregator, so the seed stage e-commerce aggregator. We essentially bought Shopify brands, you know, between the sizes of 1 million to 10 million in revenue. You know, I helped lead a lot of the M&A financial diligence, as well as kind of the finance and accounting operations. Yeah, a lot of that background of working Ecom and CBG has really kind of informed the idea of D zero. So, you each took your own paths, you stayed in touch, and then at some point you decided to come back together and co-found this company. How did that come about? Michelle has always had an entrepreneurial bug, and she, you know, I don't want to speak for you, Michelle, but she, you know, really joined her early

stage aggregator for the purpose of getting that Hands-On operating experience. She had reached out to me and said, Hey, you know, I see this problem in the market. I deal with it every single day. I'm living and breathing it. I've tested all the other software in the market, and nothing has really solved my issue. It just seemed like a really important problem to solve. Obviously, QuickBooks is super archaic. We're well-versed in the accounting space, and you know, Michelle's super well-versed in inventory management. So, it just seemed like a very interesting problem to solve. When I think now, especially with all the technological advancements and AI and everything else happening in the world, there's some cool things that you can do now to expedite solving that problem. Tell us a bit about where the company's at today. You know, how long have you been at this? What does the team look like? Just give us a sense of where it's at. Yeah, we've been actively building for about a year now. Really proud of the progress.

they've made in that time. We have a team of about nine people, very product and engineering heavy, which is great so that we can rapidly kind of deploy new features and build everything that we want to build. You know, we talk to brands every single day, and while there are a lot of common pain points, there are also, you know, a long, long list of things that people want. And so I think, you know, our product roadmap is never-ending, and we're constantly trying to push those new features. As of now, we've built an automated general ledger for brands. So if in the easiest, simplest terms, it's a complete QuickBooks replacement. We plug in natively to your Shopify and Amazon and other selling portals, pull in all your transaction data, disaggregate things like fees, discounts, shipping, income, etc., and create automatic journal entries and your income statement and across all of your statements. We also have a product catalog to record your unit COGS, and so those entries are also made automatically based on your order information. So basically, we automate the accrual accounting portion.

for an e-commerce seller, which is fantastic. You know, a lot of people have a lot of problems with the integrations in QuickBooks, pulling those numbers down from different sources, disaggregating them, and parsing through them, tracking all their unit cogs separately in a spreadsheet. And so, I think having one place where all that information lives is really, really important. And then, you know, we have some, I would call them more normal, run-of-the-mill functions in there, such as invoicing, obviously bill pay, and that all flows back into your general ledger. So, wanted to build, you know, one complete financial operating system where all of your information lives. And from there, continuing to build more, you know, PO issuance, inventory tracking features that, again, will roll straight up into your accounting. So, you're never dealing with bad integrations between QuickBooks and your IMS, where things get lost in translation. You invoice for a product, it doesn't reflect in your inventory balance, things like that, right? When you have one place where all of that lives.

you can eliminate a lot of that manual entry across systems. What do you think is the thing that you've built so far that would feel like the most magic to an existing QuickBooks user? Yeah, I think that that magic moment probably depends on the size of the user. And so, I think for our smaller customers, you know, we sent out a survey to all of our users who were like, What is your favorite thing about Day Zero? And they overwhelmingly just said, you know, the simplicity, the UX. They love how streamlined and fast it is. They're not having to deal with the mumble-jumbled QuickBooks. And so, I think if you can give people a great experience where they get, you know, that pre-filled Excel model, they get what they need to file their taxes, but they're not banging their heads against the keyboard trying to figure out what the formulas are. I think that's that aha moment. And then, I think as you move up market, obviously when we talk to brands that are 10, 20,

$30 million. Their needs are a little different, right? They don't really need a pre-formatted model, but they would like an inventory system that plays well with their accounting function. I think something else that we haven't touched on yet that makes them unique is that we actually update and reconcile your financials five times a day. And so, you always have reconciled numbers. And what happens right now if you're a business, you know, it's July 23rd, you go into your QuickBooks, you don't have July 23rd numbers. Usually, at the end of July, you give your numbers to an accountant, and then by August 15th, they're going to get you your July numbers. And by August 15th, like you're already buying inventory, you're buying ads for September and October, right? It's like a little bit too late to realize what happened in July. And so, we get you your updated numbers every single day so you can always go in and see what's happening in your business. Michelle, in her last life, you know, managing a lot of

Brands one thing that happened to her, which I love to talk about, is that she gave her accountant the numbers at the end of the month. The accountant came back to her 15 days later, and she was looking at the numbers and was like, Wait, why are my gross margins down so much this month? This doesn't even make sense. And it turned out that their shipping provider was overcharging them like $50,000 or something for the whole month. They were putting very small items in very big boxes, and no one caught it right until 45 days later after the end of the month. And by then, it was like way too late to change it, and the shipping provider wasn't going to refund them. And so, it's just really important, right, to stay on top of the numbers as you scale, as you grow, just to catch things like this and make sure all of your expenses are in order, you're not getting overcharged for things, duplicate transactions, things like that. Yeah, the pain of closing the books and waiting for the close is

definitely real. As part of that, the relationship with the accountant, you know, it's always like the sort of the triumphant of like the brand, the accountant, and QuickBooks, and everyone is just trying to make QuickBooks, you know, work as the source of truth. How do you envision the role of the accountant when someone has a platform like yours where, say, you know, a lot of, you know, the bookkeeping anyway is being done automatically by AI? How do you think about that, and how do you think about it, you know, in products? Our hope would be that we're empowering accountants to take on a more strategic finance role and less of a transaction categorization, data aggregation, data auditing role, which I think a lot of that can be done with technology and with the help of some AI tooling that we're putting together. So, I think, you know, at the low end, we've had people get rid of an accountant and use Day Zero, maybe take them in for tax filing. On the higher end, I think people still want an accountant.

a human in the loop, but maybe they're just using day Zero again for that transaction categorization piece. Over time, the entire point of technology is that you're automating a lot of these manual tasks, right, and empowering people to do more higher-level thinking work. And I think over time, that's going to happen with a lot of the pieces and putting together a financial puzzle as well. If you could give a piece of advice to a brand owner who might be considering an acquisition in the future, what would you say that you saw people doing wrong often that maybe impaired their chances of success? I think you have to be very intentional about what metrics you want to show because at the end of the day, it is mostly a pretty objective evaluation method. It depends on the time of the market, but there are certain things that investors look at, whether it's like revenue performance, but just being intentional about like, Okay, I need to grow my business 20%. How do I get there? If you don't know how to get there, maybe

consult with a fractional CFO, and they'll just really break down the steps that you need. I say, like, start with a goal and try to back into the goal, and the goal could be in three years, the goal could be next year, but just being very intentional of how you build your business, I think, is really important. It's interesting to hear you frame it like that because it sounds like, in your view, it's almost all execution risk, right? Like, if you have the right sort of ingredients, the steps are out there; you just have to figure out what they are to make that growth happen. Is that a fair readback? That is a simple way to say it, but I think, at the end of the day, every single business is a marketing business. You need a lot of brand equity, and so building brand equity is not the easy thing. We're not marketing experts, but there's a time when a business reaches enough traction and brand equity where you start getting a lot of organic traffic and a lot of organic inbound, and that's really where a brand can start.

scaling a lot, and so even know we do this for ourselves, right? Just SEO placement, maybe higher marketing agency content marketing, so all this stuff is very important. You may not nearly see it in your numbers right away, but you know it starts building over time. That's a super interesting lesson in breakdown in how you think about acquiring. Thank you for that kind of off-the-wall question here, but is QuickBook still here in 10 years? What do you think? I think yes, hopefully at a much smaller scale, and you know Day Zero has overtaken some of its market cap. I think, you know, Intuit is like, I think, a hundred billion dollar market cap company. For that market value to be wiped out in 10 years would be shocking, but I think, you know, there are definitely a lot of startups that are biting at their heels, us obviously being one of them. And so this space especially is like very ripe for innovation. There are a couple of large incumbents of which there hasn't been a lot of innovation in many

many years for a lot of different reasons, and I think QuickBooks should look out. I hope you enjoyed this episode of Blue Ocean. Blue Ocean is produced by StartOps, a growing collection of resources for operations leaders at e-commerce brands. A few of the things we built include a growing vendor-free Slack community for operators to ask their most important questions and get answers from trusted peers, a job board that curates jobs from 1,500 modern brands, a media hub that includes this podcast as well as articles and templates on a variety of operations topics, and a comprehensive directory of the software and services used by our community members. If you want to learn more, head to StartOps.network, and to keep up with the latest information from StartOps or catch the most recent episodes of Blue Ocean, follow the StartOps page on LinkedIn or subscribe to our newsletter. Thanks for listening, and hope to catch you next episode.

The Importance of Real-Time Financials | Julia Tolmachyov & Michelle Liao @ DayZero

StartOps

Building Day Zero: AI-Automated ERP for E-Commerce

Day Zero, co-founded by Julia Tomov and Michelle Lao, aims to create a modern, AI-automated ERP system for e-commerce and CPG brands.

The founders' business school education at Wharton provided them with a strong foundation in finance, accounting, and business strategy, which has been instrumental in building their company.

With a background in investing and a focus on accurate financials, they emphasize the importance of staying on top of numbers and setting forecasts for small businesses, especially in today's challenging economic climate.

Co-Founding D Zero: A Journey from Finance to E-Commerce

The co-founder started in finance in New York, then moved to San Francisco for private equity and e-commerce aggregation.

Michelle's entrepreneurial drive and firsthand experience with market problems led to the idea of D Zero.

The company has been building for a year, with a team of nine, and offers an automated general ledger as a QuickBooks replacement, integrating with Shopify and Amazon to streamline transaction data and accrual accounting.

Streamlining Financial Operations for E-Commerce Sellers

The platform aims to consolidate all financial information for e-commerce sellers, eliminating the need for multiple integrations and manual data entry.

It offers key functions like invoicing, bill pay, and inventory tracking, all seamlessly connected to the general ledger.

With the unique feature of updating and reconciling financials five times a day, users have access to real-time, accurate numbers for better decision-making.

The Importance of Staying on Top of Numbers in Business

A brand owner experienced a significant drop in gross margins due to their shipping provider's overcharging, which went unnoticed for 45 days.

It's crucial to monitor expenses and catch discrepancies early, especially as a business scales.

The role of accountants is evolving with AI and technology, allowing them to focus on strategic finance rather than transactional tasks.

Advice for Brand Owners Considering Acquisition

Technology is gradually automating manual tasks, allowing for higher-level thinking work.

Brand owners should be intentional about the metrics they want to show and set clear growth goals.

Building brand equity is crucial for success, as it leads to organic traffic and inbound opportunities.

The Future of QuickBooks and StartOps' Impact

QuickBooks may still be around in 10 years, but likely at a smaller scale due to emerging startups.

The market for accounting software is ripe for innovation, with several incumbents lacking recent updates.

StartOps is building a community and resources for operations leaders in e-commerce, offering a Slack community, job board, media hub, and software directory.