We get it – you run a brewery because you love your craft, your creations, and the incomparable brewery culture. The last thing you want to do is worry about brewery accounting.
This article will share some tips to help you along the way, so you can navigate the complex world of brewery accounting with greater confidence.
Getting Brewery Accounting Done Right
Brewery accounting isn’t just a routine task; it’s the backbone of informed decision-making for a business. Accuracy in financial records directly impacts a brewery’s financial health. Neglecting or placing it on the back burner can lead to setbacks, headaches, and substantial financial risks.
However, getting brewery accounting done right opens a new world of opportunities.
With a clear view of your financial health and seamless record-keeping, you’ll have an accurate picture of your business as a whole and be confident you’re making the right decisions.
Avoid These Common Brewery Accounting Mistakes
Accurately reflecting inventory is critical for managing your brewery. It’s important to consider not just finished goods, but also:
- Raw materials
- Packaging materials
- Barrels and storage containers
- Merchandise and promotional items
- Maintenance supplies
An extremely common mistake is inadequate tracking of inventory levels, which often leads to miscalculating the cost of goods sold (COGS) that can impact cash flow and profitability.
Inconsistent Costing Methods
To ensure your financial reporting isn’t distorted, you need consistency in your cost accounting methods.
Breweries may choose to use:
- Average cost method
- Standard costing
- Alternative approaches
However, some breweries make the mistake of using more than one approach, which can impact your financial analysis. Taking the time to make sure your bookkeeping methods are consistent is worth it!
Neglecting Tax Compliance for Brewery-Specific Incentives
The good news is that there are often specific tax incentives or credits available for alcohol production. For example, the IRS may subsidize certain activities in your brewery that qualify as R&D to incentivize innovation, such as developing new beer recipes and improving the brewing process.
Unfortunately, by not having a thorough understanding of the changing tax landscape, some breweries miss out on helpful financial opportunities that could make a big difference in their bottom line. Don’t be one of them!
Misallocation of Overhead Costs
Incorrectly allocating overhead costs can skew the cost structure of brewery products, muddying the potential for informed decision-making. Common overhead costs for breweries include:
- Labor costs
- Equipment maintenance
- Insurance expenses
- Marketing and advertising
- Quality control and testing
- Licensing fees
The common mistake of misallocation can lead to inaccurate pricing decisions, which can negatively impact the brewery’s overall financial performance.
Incomplete Financial Reporting
Financial reporting can be a large undertaking, which leaves substantial room for error. Some of the basic financial statements you might be familiar with include:
- Profit and Loss Statement (Income Statement)
- Costs of Goods Sold Report
- Balance Sheet
- Cash Flow Statement
- Accounts Receivable Report
- Accounts Payable Aging Report
However, holistic brewery accounting typically requires a bigger picture. Here are some common financial reporting issues a brewery might face:
- Overlooking Key Performance Indicators (KPIs):
- Neglecting Production Efficiency Metrics: Ignoring KPIs such as brew time, average pour rate, yield per batch, or equipment downtime hampers operational efficiency assessment, impacting productivity.
- Disregarding Sales and Distribution Metrics: Overlooking sales growth, distribution reach, or customer acquisition rates hinders understanding potential growth avenues.
- Ignoring Quality and Customer Satisfaction Metrics: Failure to track KPIs related to product quality, customer satisfaction, or feedback overlooks crucial elements impacting brand reputation and market positioning.
- Absence of Budget-to-Actual Comparisons: Comparing actual financial performance against budgeted figures helps identify deviations and adjust strategies accordingly.
- Failing to Generate Comprehensive Financial Statements: It’s not uncommon for breweries to lack the complete set of financial statements necessary to make business decisions.
- Ignoring Cost Breakdowns: Lack of detailed cost breakdowns for different products or segments within the brewery makes it challenging to pinpoint profitability or inefficiencies.
- Disregarding Trend Analysis: Not conducting trend analysis over time prevents recognizing patterns or changes in financial performance crucial for decision-making.
A holistic approach to financial reporting can ensure all necessary brewery accounting and financial reports are complete and easy to update.
Reach Out to Us for Help with Brewery Accounting
Getting brewery accounting right isn’t just an option; it’s a necessity for sustainable growth. At ZenStrategies, we understand the intricacies of brewery accounting and offer tailored solutions to ensure accurate financial records and informed decision-making.
Our approach goes beyond traditional bookkeeping methods, focusing on the holistic financial health of your brewery. We’re the accountants who handle everything needed for your brewery business. By working with us, you can navigate the complexities of brewery accounting and spend your valuable time focusing on crafting your ideal brewery experience.