Case Study: Internal Controls Installation for a Scaling E-Commerce Business
Building a control architecture for a business that grew from Rs 80 lakh to Rs 4.5 crore
Executive Mandate Summary
Key Transaction & Governance Challenges
- •The business had grown from Rs 80 lakh to Rs 4.5 crore while continuing to operate largely with the control practices designed for its smaller scale.
- •The business was processing approximately 3,000 orders per month, 200 returns, 45 vendors, 12,000 SKUs and transactions across four marketplace channels.
- •Returns received at the warehouse were not consistently reflected in the accounting system, creating an average 23-day processing lag.
- •Marketplace payouts were accepted at face value without reconciling commissions, returns and penalties against order-level data.
Northrop Execution Architecture & Methodology
Section 1 - The Central Issue
The business had grown from Rs 80 lakh to Rs 4.5 crore in two years. The controls had not changed at the same pace.
At Rs 80 lakh, founder review and informal knowledge of vendors and warehouse activity could provide significant oversight. At Rs 4.5 crore, the same approach had to support thousands of transactions across multiple warehouses, vendors and marketplace channels.
Section 2 - Process Mapping
Northrop mapped the complete transaction lifecycle from marketplace order receipt through financial close.
The objective was to identify where a transaction could move through the business without an independent check or timely documentation.
This exercise identified 11 control gaps.
Section 3 - Controls Designed Around the Existing Team
Rather than designing an enterprise-scale control system, Northrop designed controls that could be executed by the existing two warehouse staff, one accountant and the founder.
The controls were not ERP-dependent. They were process-dependent: a defined action, performed by a defined person, at a defined point and producing a defined record.
Section 4 - Returns Control
Every physical return is entered into a returns register on the day of receipt. The accountant processes the corresponding accounting entry within 48 hours, with a weekly reconciliation between the register and the books.
This reduced the return-processing lag from 23 days to 3 days.
Verifiable Institutional Outcomes & Value Realized
- The average processing lag between warehouse receipt and accounting recognition was substantially reduced.
- Aggregate annual marketplace reconciliation variance was reduced through weekly order-level reconciliation.
- The three-way matching control eliminated duplicate vendor payments during the measured period.
- Errors identified in the following year's annual audit fell by approximately 91%.
Ashish Chaudhary
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