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Clarity

Olga Bashkatova, CPA

New York, NY

Finance/Accounting/Operations leader, passionate about start-ups. Experience with SAAS, digital media, high-volume transaction businesses. I can help with bookkeeping, GAAP, software implementation/maintenance, payment processing, reporting, investor decks, and forecasts.

I am used to working a lean team and can advise you on how to do more with less, to refocus your time, energy and resources on developing your business instead of managing it.

$2.50/min

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Financial Modeling Mergers & Acquisitions Corporate Finance Accounting Financial Analysis Financial Accounting Financial Reporting Internal Controls Divestitures Reporting & Analysis

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CFO/Financial Controller

I have worked for 4 start-ups with various funding structures, including PE, debt, founder capital and public. I have worked on two S-1 filings, 4 acquisitions and a 70% asset sale. I can provide guidance and assistance with respect to filing requirements, controls, financial statement health, due diligence in M&A, projections/forecasts and investor decks used for pitches.

Finance VP

I have helped scale 4 start-ups, working with all departments across the board to pull the businesses together and succeed.

Financial Controller

Adept at ensuring GAAP compliance, management reporting, system and process implementation, SEC filings, team building, and compliance.

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Olga Bashkatova, CPA answered

How do I account for reward points? How can I park the funds for reward redemption without taxing the funds as income until they are used for rewards?

Hi, I worked for a business that does exactly what you described. I believe the answer is - you can't "park" the funds and avoid taxation of revenues you earmark for rewards cost. Rewards cost is just another cost of doing business for you.

I think the key here is that the income you recognize is not tied to points that are being redeemed. On one hand, you generate revenues from advertisers, that is your revenue, you will be taxed on the profit (in some states on revenue post some adjustments) that remains after you take out expenses (most start-ups pay state/federal minimum taxes, if any, because they are not profitable). On the other hand, every time a user earns a point, you have to book a liability on the balance sheet showing the value of the points earned but not yet redeemed. Every month, you will have to recognize an expense for Cost of Rewards, which decreases the liability. That expense hits your P&L and reduces your revenues. That is the process by which the cost of points hits the income statement, you can only recognize as an expense the cost of points that have been redeemed.

Please consider that you can institute a rule (in your T&C) that says any unused points in accounts that have been inactive for 6 months expire. Once points expire, you can reduce your liability. After approximately, 2 years, you will have enough history to also calculate breakage and reduce the points liability by a % of points that historically have not been redeemed.

I am happy to walk you through our points cost calculations. They do tend to get a little complicated.

Regards,
Olga

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Member since June 2016