Success Story: Revenue Recognition, Relief and Rejuvenation
Learn how SPRCHRGR created a solid footing for Pause Studio’s franchise expansion, streamlined its back office, and transitioned from cash to accrual to achieve GAAP-compliant financials.
Core Challenges
Pause Studio is a rapidly growing company in the Health and Wellness industry based in Los Angeles. Founded by experienced and innovative leaders in 2016, Pause provides therapeutic relief through modern and holistic solutions that support physical and mental recovery.
Pause operates with a friendly PC-MSO entity structure to remain in compliance with Corporate Practice of Medicine laws while enabling employees and outside investors to have an ownership stake in the business. Each corporate-owned retail location has its own legal entity that receives shared services from a licensed medical practice (PC), a centralized medical services organization (MSO).
In 2022, Pause launched its franchise expansion plans, adding franchisees in California – and will soon be in more states.
Pause had to upgrade systems and processes to manage its growing number of locations, franchisee relationships, and revenue streams. They needed GAAP-compliant financial reporting to meet the FTC’s franchise disclosure rules and governance, to improve the quality of their board reporting, and to prepare for due diligence with future equity investors. These changes were especially complex for Pause, given their multi-entity structure, so SPRCHRGR was brought in to level up their accounting and finance structure, convert their books from cash to accrual, and ultimately set them up to bring in a full-time CFO with confidence.
How We Supported & Supercharged
Switching from cash to accrual
Like many rapidly scaling businesses, Pause had outgrown its initial cash-basis accounting approach, and its basic bookkeeping service provider lacked the expertise to convert to GAAP.
Transitioning from cash to a true accrual basis requires a deep understanding of accounting principles and applying them objectively to every business activity. Along the way, SPRCHRGR developed a full set of reconciliation procedures and supporting schedules to give Pause and their various outside stakeholders confidence in the accuracy of their numbers.
Syncing data between systems
Pause operates on a collection of siloed software and financial systems to manage a high volume of sales, personnel, and operational activities across multiple studio locations. By thoroughly reconciling historical data between systems, SPRCHRGR’s team uncovered and resolved financial reporting errors related to prepaid gift cards and deferred revenue liabilities that the prior bookkeeping team’s cash basis approach missed.
Throughout our work, we kept running into sync issues between Zenoti, the scheduling and point of sale system, and the QuickBooks general ledger that were undermining timely, accurate financial reporting. We documented the issues and advocated with the 3rd party software vendor to fix the API errors. Where the software vendor fell flat, SPRCHRGR developed process workarounds and custom tech solutions of our own to bridge the gaps.
Creating accurate, automated accounting
SPRCHRGR’s team developed a standard chart of accounts to capture all relevant activities in Pause’s business. This made consolidating financial results across the entities quick work. That exercise accelerated the month-end close process and uncovered new insights for Pause’s leadership team to glean from their financials.
Concurrently, we helped Pause standardize operational workflows across the different business segments using industry-leading software tools and best practices to streamline administrative functions, reduce risks, and relieve cash flow bottlenecks.
“From an accounting standpoint, we set them up well to add more studios, train new franchises on the best way to run their own back office, and have confidence and clarity in the results,” says Wendy Womack at SPRCHRGR.
The upgraded tech stack and process improvements provide better controls and scalability for Pause’s growing organization. It also solved a compliance issue by simplifying state sales tax filing.
Outcome
Poised for growth
With SPRCHRGR’s support, Pause Studio can now harmonize processes across its current (and future) entities to comply with GAAP standards. SPRCHRGR went above and beyond the original scope of work to help Pause restructure business-critical workflows across the growing organization, implement new accounting software, and set their staff up for success – including a new CFO ready to take the business forward.
“Before we brought in SPRCHRGR, we had junior varsity accounting,” says Jeff Ono, Founder and Managing Partner. “That was fine when we were a scrappy startup, but as we expanded locations and began franchising, it became clear we needed something more. We now have major league accounting, which enables us to operate more efficiently, make better decisions, and remain compliant. SPRCHRGR helped us establish a platform we can continue building on far into the future.”
A relief for health & wellness leaders, medical practices, and MSOs
With our team’s expertise and experience in the health and wellness industry and understanding of the complex compliance requirements these businesses are subject to, SPRCHRGR helps clients optimize their accounting processes and workflows across all PC, MSO, and related entities. This may involve streamlining data entry procedures, implementing a standardized chart of accounts, and optimizing accounting software to ensure compatibility with GAAP requirements. As your needs grow, we can expand to provide fully managed long-term business process outsourcing solutions.
When you’re ready to take your company to the next level – whether it’s to get your books GAAP-compliant, drive process efficiency, or enhance management insights – SPRCHRGR can provide both relief and rejuvenation. Contact us to learn how we can help rev up your business.