Y Ventures pointed on Wednesday to specific inadequacies, including using Excel for inventory management, as leading to its need to restate its first-half results to a loss.
The first-half results were restated to show higher operating expenditure of US$1.2 million, resulting in a net loss of US$1.0 million for the period, compared with claiming a net profit of US$100,000 previously.
In response to queries from SGX and its sponsor, Catalist-listed Y Ventures said that its transaction volume and business operations expanded since its listing, creating “higher complexity” in acquiring and documenting inventory.
Y Ventures uses large e-commerce platforms, including Lazada and Amazon, to distribute third-party products across multiple countries while incorporating a data-analytics service.
“Coupled with its tight manpower, there was considerable stress on its then existing internal control systems and standard operating procedure,” the company said in a filing to SGX.
It pointed to three key issues:
Firstly, it entered incorrect unit costs for inventories as of 30 June, saying that it had been reconciling inventory monthly using Excel; Y Ventures said the system had been adequate at the time it listed on SGX as it had one key supplier accounting for most of its purchases.
Since then, Y Ventures has developed an in-house computerized inventory management system to track all transactions on online marketplaces on an hourly basis, it said.
Secondly, it pointed to the understatement of administrative expenses, saying it previously handled the matters on a half-yearly basis, but it is now done monthly so that discrepencies can be detected more quickly.
Finally, it said its finance and accounting department lacked enough manpower and expertise to handle the increased volume of transactions and the business expansion. At the end of June, the department only had four staff, including the then chief financial officer, a finance manager and two junior accountants, Y Ventures said.
Currently, the department has been expanded to six, with a CFO, an assistant finance manager, an assistant accounts manager, a senior executive and two executives, out of which two are certified public accountants (CPAs) and two are in the process of obtaining CPAs, it said.
Y Ventures said the accounting lapses were discovered when the current CFO was appointed at the beginning of September and the company started consolidating its accounts on a monthly basis, with an internal check and review uncovering the issues.