Launching a brewery with a taproom is an exhilarating journey, but it brings a unique set of financial challenges, especially in the current craft beer market. Establishing robust accounting practices right from the start is crucial for long-term success. Here, we outline essential accounting tips and practices to help startup breweries with taprooms lay a strong financial foundation and ensure sustainable growth. Keep in mind, an accounting and bookkeeping system isn’t just for tax return preparation. Regular use of your accounting and bookkeeping system is essential to running a strong business in any industry and at any stage.
Implement a Robust Accounting System
Investing in a reliable accounting software tailored to the needs of breweries can streamline your financial operations. Look for features like inventory management, sales tracking, and integration with point-of-sale (POS) systems. Popular options include QuickBooks, Xero, and specialized brewery management software like Ekos and OrchestratedBEER.
Separate Personal and Business Finances
One of the most critical steps is to keep personal and business finances separate. Open a dedicated business bank account and use it exclusively for all brewery-related transactions. This separation simplifies bookkeeping and helps maintain clear financial records.
Track All Income and Expenses
Meticulous tracking of all income and expenses is fundamental. Categorize transactions accurately to monitor profitability and identify cost-saving opportunities. Key categories include:
Sales Revenue: Track income from taproom sales, distribution, and events. This needs to come from your POS system and not from recording deposits as sales. The reason for this is so that you can record what was actually sold and you can have separate revenue accounts for beer sales, food sales, merch sales, etc. We also suggest tracking any wholesales beer sales separately from taproom sales categories.
Cost of Goods Sold (COGS): Include costs of raw materials, packaging, and production. It’s a good idea to separate your different COGS categories to match the categories for revenue. This will allow you to see COGS percentage of sales for each line of product you are tracking.
Operating Expenses: Account for rent, utilities, salaries, marketing, and other overhead costs.
Monitor Cash Flow Regularly
Cash flow is the lifeblood of your business. Regularly monitor your cash flow to ensure you have enough liquidity to cover operating expenses and plan for future growth. Create cash flow forecasts to visualize inflows and outflows and identify potential cash shortages. It is critical to record your bills and invoices in your accounting system so you can better understand what cash inflows and outflows are to be expected in the future.
Budget and Forecast
Develop a detailed budget and financial forecast. This proactive approach helps you plan for upcoming expenses, set financial goals, and make informed business decisions. Review and adjust your budget regularly to stay aligned with your financial objectives. This is one area where a lot of new breweries and taprooms can always improve on. Utilizing tools within your accounting system can make this process much easier.
Manage Inventory Efficiently
Effective inventory management is critical for breweries. Implement an inventory tracking system to monitor stock levels, track ingredient usage, and reduce waste. Regularly reconcile physical inventory with your records to ensure accuracy and prevent stockouts or overstocking.
Stay on Top of Tax Obligations
Understand your tax obligations and stay compliant with federal, state, and local tax requirements. This includes sales tax, excise tax, payroll tax, and income tax. Consider working with a tax professional who specializes in the brewery industry to navigate the complexities of tax regulations and maximize tax benefits.
Reconcile Accounts Monthly
Perform monthly reconciliations of bank accounts, credit cards, and other financial accounts. This practice ensures your records are accurate and helps identify discrepancies early, allowing you to address issues promptly.
Maintain Detailed Financial Records
Keep detailed and organized financial records. This includes invoices, receipts, bank statements, payroll records, and tax documents. Good record-keeping not only simplifies tax filing but also supports financial analysis and audits. This cannot be stressed enough. There are too many examples of audit changes that increased tax costs because of a lack of good record keeping. Additionally, these documents provide a lot of info not just for bookkeeping but for making sure you are paying the best prices for ingredients and supplies.
Seek Professional Help
Consider hiring an accountant or financial advisor with experience in the brewery industry. They can provide valuable insights, help optimize your financial processes, and ensure compliance with accounting standards and tax laws. We have a blog post about the benefits of hiring a specialized advisor in the brewery industry.
Startup breweries with taprooms can build a strong financial foundation by establishing and adhering to these essential accounting practices. Proper financial management not only helps navigate the initial challenges but also sets the stage for sustainable growth and success.
Implement these practices diligently, and your brewery will be well on its way to achieving financial stability and long-term prosperity.
