Econommi.io is a fee-based (no interest) sub-prime automotive leasing company that securitizes fractions of the lease using Blockchain technology to sell to investors as tokens, allowing securitization for smaller investors to participate in the sub-prime leasing market.

Pre-Squirrel Econommi

Carmodity Ltd. (dba Econommi) was incorporated in June 2019 and facilitated car sharing between owners and renters in their initial business model. Truro was to be their main competitor upon their entry into the Vancouver market.
However, the chance never came as COVID-19 practically shut down operations in 2020, but they would sign their first lease in December 2020 discovering a new path. The company powered along, as many did, expecting the bans to be lifted. Instead in the fall of 2021, Carmodity would shut down the car-sharing platform and concentrate on leasing instead, having expanded into tokenization of those leases earlier in the year. They would also begin using the name Econommi.

Econommi also reached out for assistance in late 2021 to Frosty Squirrel, who would help the company change for the better.

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This was the first six months of Frosty Squirrel’s involvement with Econommi.
– Clean audit completed in 6 months, turned to ongoing CFO & Controller after 5
– ~20 hours a week
– Located specialized auditor for the company
– “Shoebox” to audit-ready in 3 months
– Restructuring of lease agreements
– Understood Econommi’s vision and how to achieve it

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The work a Financial Controller performs is mainly maintenance, but it also is about developing the accounting system that will work best for the company. This includes policies and procedures, techstack, training of personnel, ensuring complete and accurate records, and a variety of other things.

When a controller has done their job right, you shouldn’t notice. It should be all behind the scenes and be seamless in performance but the only way to get to that point is through trial and error. It is much simpler for a mature company to have a controller adjust the system since it is already developed properly. Comparably, start-ups can shift their focus, product or service on a monthly or quarterly basis, this results in processes that were implemented becoming obsolete if not flexible enough to adjust to the new needs of the company. This is why many start-ups do not see a need for internal controls.

The other reason to do controller work first is that if the records are not complete, accurate, or up to date. This results in the reporting being more flawed. This will result in the CFO’s work suffering from inaccuracies that could have been easily avoided as CFO work is normally exponential in nature. This is not to say that there was no CFO work performed in the months after becoming the CFO of Econommi. Assisting the CEO with adjusting lease contracts to better profit the company, assisting with the financial model and ferreting out errors or potential issues were a weekly occurrence.

Frosty Squirrel achieved the following during the next 12 months of service with Econommi.io
– Furthered his understanding of the culture at Econommi
– Improve the sustainability and profitability of the company
– Improved the financial controls and systems
– Reduced stress from the CEO and team having a financially focused person within the company
– Increased transparency with investors, both equity and token-holders through increased reporting
– Corrections of the financial model and lease contracts, insulating Econommi from unneeded risks
– Always offering advice with alternative solutions

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Moving the world away from endless borrowing is the vision of Econommi.

Frosty Squirrel believes this is a vision worth supporting. Concentrating CFO services with this vision in mind, high-level discussions concentrating on how to achieve this goal within the constraints of the company’s reality were common with the CEO and other team members over the following year.

Revision of the financial model on a quarterly basis to adjust the numbers and address any miscalculations or assumptions. After several rounds of revision, a more accurate model came to exist, allowing a better prediction of the points of cash restrictions as well as determining the profitability of the model overall.

A CFO’s job is to predict the financial future of their company. We do the best we can, but if a model was 100% certain the CFO and the rest of the company would never need to work again.
Financial models are estimations based on various assumptions, valuations, and make-believe future numbers. The more complex the company, the more complex the model and by default the more unreliable it becomes, therefore requiring more time invested to reduce these risks. The more assumptions made, the higher the probability of one of those being wrong may result in the model being millions off the valuation rather than the $10,000 the assumption was off by.
CFO financial modelling is exponential while controller work is additive.

Determining the pathway for the company falls on the CEO, however, it is important to understand that the CFO and other officers are there to assist with this purpose. This includes questioning the validity, reasonability, and assumptions that the CEO is making. This is another reason a diverse team from various backgrounds will help the company overcome challenges faster than a monolith. Management should be able to question each other in their assumptions or decisions, this should always be done in a respectful manner while coming from a commitment to the company’s vision rather than a source of blame.

Econommi growing into its next phase requires a significant capital raise, the team as a whole can now concentrate on polishing the product now that internal controls and SOPs are in place for the juniors to follow as they expand their roles and take on new challenges.
The Squirrel was a major factor in accomplishing this.

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Anyone who has been audited, reviewed, or inquired as to their business knows that the government wields an enormous amount of power to cripple your livelihood. Unfortunately, this power is handed over to unskilled and untrained government employees far too often. While the Federal Government has made great strides over the past decade to improve self-service and reporting to reduce these negative interactions, the provincial governments have lagged.

Of all the government agencies that the Squirrel has worked with, the BC PST department is near the top of the list as the worst, there are other contenders the PST issues that Econommi has faced seem to be much more than average. There have been two major PST-specific incidents that the Squirrel has dealt with for Econommi.

Year of the PST Refund

Econommi deals directly with used car dealerships, not all these dealerships are a smooth onboarding. To maintain good relationships with dealerships the team may accept certain things to be corrected later. One of these items was PST charged by various dealerships during the onboarding process and subsequent months. PST should not be charged on invoices for cars intending to be leased or resold, PST is to be charged to the “end user”. This is the essence of the rule with PST as it is not refundable in most cases like GST, this would result in the end user being charged twice for PST, first on the car purchase and again on each lease payment.

Econommi accumulated over $30,000 of refundable PST erroneously paid from dealership invoices over 2+ years. This was identified during the initial audit preparation but was to be addressed later for priority of work concerns. There is a 4-year window to apply for Econommi’s specific refund. As this was an ongoing issue, the company held off filing the refund until the systematic issue was corrected with a set of internal controls and SOPs. This occurred approximately 12 months after becoming CFO and Controller.

After the issue was corrected, the Squirrel electronically prepared all the paperwork for the refund for filing. This was when it was it was discovered that refunds of this nature were required to be filed through paper and electronically filing was not allowed. Resulting in a significant amount of extra work, as the paperwork needed to be signed by a person listed on the dealership license.

Sending the electronic working papers to Hudhaifah for printing, signing, and mailing only took a minor amount of badgering and a couple of months to complete. The application was sent in August 2023.

It is currently May 20, 2024. The “cheque is in the mail”.
Between the time the application was sent and today, the following happened.
– 3 calls to the PST Refund department to determine why the application disappeared
– 6 months of delays before it was processed
– 1 month of dealing with the agent’s requests for additional details (everything was sent electronically)
– 2 months of lost mail, it was sent to an old address
– 2 weeks of processing the cancellation of a cheque and resending

A Voluntary Disclosure Penalty

The government has a program to allow companies to report errors they have discovered, and pay any back taxes owed without penalties or interest. The government penalty is 10% and interest is 1% per month of the tax and penalty balance. A multi-million dollar company can discover a $100,000 tax balance owing from an error 3 years prior, this results in a balance of approximately $154,000 owed, of which $54,000 is interest and penalties.
As the company, do you risk not reporting it for 4 more years allowing it to become statute-barred (past 7 years) saving the company $154,000 or do you report it and pay the interest and penalties?
The voluntary disclosure program was created to allow a third option, report it, pay what is owed and move on. This saves the government time, money and effort while ensuring the company eliminates the risk of a future audit revealing in year 6 a balance of $217,000 owed. This is a win-win.

In early 2023 an error was discovered within the PST calculations of the leases that affected some leases but not all. An assessment of all the leases on Econommi’s books revealed the discrepancy was approximately ~$13,000 of PST owing. After filing the adjustments, penalties and interest resulted in the total balance increasing to ~$17,000.

Being good corporate citizens and assuming the PST department was competent at their job, Econommi paid the full amount as instructed by the program and then filed the application for a refund.

This application was made during the same time as the PST Refund, the response time was ~3 months. Econommi was assigned an agent who asked for the PST ledger and the top details of the top 10 sales. These were sent without question, as this question is standard.
A couple of weeks later the rep stated the company owed ~$14,000 instructing how the company could pay. An immediate follow-up email including calculations showing the ~$17,000 paid and ~$4,000 refund being requested was sent while additionally asking for support to the ~$14,000.
This was ignored for weeks and the response reduced the amount from ~$14k to ~$10k including working papers showing all the amounts owed, not reconciling to the amount in the email and also omitting all payments made on behalf of the company.

After several, several, more emails and ignored phone calls, the amount was reduced to $1,500 owing (remember we were owed $4k for the interest and penalties paid). Continued requests for calculations that supported the government’s position were ignored until upon filing the next PST return the Squirrel discovered that the representative had closed the file and levied a $908 balance owing.

As this entire process took a significant amount of time and effort, the CEO stated to cease the efforts for the refund and Econommi would pay the balance. Squirrel argued against paying them a dime and convinced the CEO to leave it outstanding. Over the 3 months of ignoring it, the balance grew to ~$1100.
At this point, the refund was being processed and Squirrel decided to deal with the balance owing, sending in a request to the PST department explaining the events above and to send the documentation of the balance to prove that it is owed.
This resulted in the ~$1,100 balance being cancelled.
This was not a full victory, as we are still owed ~$4,000, but now knowing the provincial government is so incompetent they will not receive free labour from the Squirrel in the future. And if the CEO didn’t call him off, the Squirrel would still be going after that ~$4k balance.

When a government comes after your company it is best to have someone with experience dealing with them on the company’s behalf in a logical and professional manner.
Logic and professionalism seem to be kryptonite to the government.

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