Accounting
March 20, 2023

Simplifying Accounting for the Brewery Industry - An Essential Guide

Simplifying Accounting for the Brewery Industry - An Essential Guide

Introducing Brewery Accounting

Brewery accounting is the practice of tracking and managing all financial activities related to a brewery. This includes recording transactions, creating reports, reconciling accounts, and other tasks necessary for proper management of finances. It is essential for any brewery owner or manager to set up their accounting system properly in order to keep track of their expenses, income and cash flow. A well-managed brewery should have an efficient accounting system that can easily handle day-to-day operations as well as long-term planning. Setting up your own accounting system will help ensure accuracy and reliability when it comes to making important decisions about your business.

In this article, you’ll learn more about setting up an effective accounting process for breweries including choosing the right software solution, establishing a chart of accounts, recording transactions accurately, automating accounts receivables (AR), and generating financial reports. You’ll also learn how you can use technology to simplify your accounting process and save time on manual tasks. 

Steps to Set Up Accounting for a Brewery

Step 1: Choose Accounting Software

The first step to setting up an effective accounting system for a brewery is choosing the right software solution. There are many different types of software available, so it’s important to research the features and benefits of each software before making your decision. Some popular options include Quick Books Online, Xero Accounting Software and Sage. Each of these programs offers unique features and integrations that may be better suited for certain breweries over others, such as specialized invoicing capabilities or detailed reporting tools. It's also important to factor in cost when selecting a program as some solutions may require additional fees, depending on the size and scope of your business.

Step 2: Set Up Your Chart of Accounts

Once you have chosen an accounting software solution, you can begin setting up your chart of accounts. Simply put, a chart of accounts is a list of all the account names that you have identified and made available for recording transactions in your general ledger (main record). This will help categorize transactions into meaningful groups for easy tracking and analysis later on down the line.

The chart of accounts for a brewery will depend on the specific operations and business structure of the brewery. However, there are some common accounts that are typically included in a brewery's chart of accounts:

  • Sales: This account tracks revenue generated from the sale of beer and other merchandise.
  • Cost of goods sold (COGS): This account tracks the direct costs associated with producing beer, including ingredients, labor, and packaging.
  • Inventory: This account tracks the value of beer and other materials held in inventory.
  • Accounts receivable: This account tracks money owed to the brewery by customers who have not yet paid their invoices.
  • Accounts payable: This account tracks money owed by the brewery to vendors and suppliers.
  • Payroll: This account tracks wages and benefits paid to employees.
  • Rent and utilities: This account tracks the expenses associated with leasing or owning a brewery facility, including rent, property taxes, and utilities.
  • Advertising and promotion: This account tracks expenses related to advertising and promoting the brewery and its products.
  • General and administrative: This account tracks expenses not directly related to production or sales, including office supplies, legal fees, and insurance.
  • Taxes: This account tracks various taxes the brewery is responsible for paying, such as income tax, sales tax, and excise tax.

It's important to note that this is not an exhaustive list, and your chart of accounts will be specific to your operations and business model. You will need to be thorough when creating this chart as it will provide useful insight into financial performance over time when done correctly.

Once you have chosen your accounting software solution and organized your chart of accounts, it is time to put this system to use.

Step 3: Record Your Transactions

After establishing a chart of accounts within your accounting system, you'll need to start recording transactions related to your brewery’s finances properly. This involves entering data accurately while keeping track which account each transaction belongs to, in order to ensure accuracy throughout reporting periods down the line.

Using digital invoices makes this process much easier, as they are less prone to errors than physical invoices because the data is entered and processed electronically. There are a number of other advantages to keeping digital invoices; including efficiency, accessibility, environmental friendliness, and security. Any physical documents (invoices/receipts) should be kept organized with digital copies stored as backups – this helps maintain compliance with regulations or other guidelines set forth by local governments or organizations.

Finally, all entries need double-checked against source documents prior to submitting them into bookkeeping records; this ensures accuracy and reliability going forward.

Step 4: Reconcile Your Accounts

Reconciling accounts involves comparing the transactions recorded in your accounting system with the actual transactions in your bank and credit card statements. This helps to identify any discrepancies or errors in your accounting records, such as missing transactions, incorrect amounts, or duplicate entries.

In the context of a brewery, this could involve reconciling accounts related to sales, expenses, and inventory. By reconciling your accounts regularly, you can ensure that your financial statements are accurate and up-to-date, which is important for making informed business decisions.

You’ll also need to think about accounts receivables (AR). This refers to the money that a business is owed by its customers for goods or services that have been delivered but not yet paid for.

As a brewery, you’re likely selling to other businesses, like restaurants, stores, and grocers. Setting up how you reconcile your accounts receivables (AR), or simply put, how you ensure you collect payment from customers will be an important part of your accounting process.

Step 5: Generate Financial Reports

Once you have ensured the data is accurate and complete, you'll use your accounting software to input the financial data into your system and generate a report. Choose the date range for the report, depending on your needs. Financial reports can be generated for any time period, such as a week, month, quarter, or year. Use your accounting software to generate the report by selecting the type of report, date range, and any other relevant parameters.

Common financial reports for breweries include income statements, balance sheets, and cash flow statements. These reports provide valuable insights into your brewery's revenue, expenses, assets, liabilities, and cash flow, which can help you make informed decisions about how to allocate resources, invest in new equipment or products, and manage your finances.

In addition to these standard financial reports, you may also want to generate specialized reports such as production cost reports, sales reports, and inventory reports to gain more detailed insights into specific areas of their business. 

These steps can seem complex, but with the help of technology, you can vastly reduce the amount of manual work required for your brewery accounting process.

Simplifying your Accounting Process: Automating Receivables

Many food and beverage distributors make sales on credit, meaning their customers place orders, receive orders, and then pay for them after the distributor invoices them. But AR management comes with particular challenges for food and beverage businesses, who often operate with tight profit margins and deal in inventory that has a limited shelf life. One of the primary reasons why AR is important for food distribution businesses is that it represents the money that the business is owed for the products it has delivered.

Accounts Receivable (AR) automation is the process of using technology tools to streamline and optimize your accounts receivable process.

Automating the process of collecting and reconciling accounts receivables allows you to reduce manual labour and makes it easier to track transactions and payments. Notch is a great tool for streamlining this process as it can be easily integrated with existing systems such as Quickbooks or Xero. This helps businesses manage their invoices, payments, customers, and more in one system. The intuitive dashboard gives users an easy way to view all outstanding invoices quickly while also allowing them to keep track of customer payment trends over time. Additionally, Notch allows businesses to set up automated reminders that will help ensure timely collection of payments from customers.

Beyond automation capabilities, Notch also offers reporting functions which allow businesses to generate custom reports on accounts receivable activity such as overdue balances or aged receivables by customer segment or region. This data can then be used for better decision-making when it comes to setting credit terms or evaluating potential risks associated with certain customers/segments in order to ensure operations remain profitable moving forward. Furthermore, analytics tools like Notch’s provide insight into the overall performance of your brewery’s accounts receivable processes, so improvements may be made where necessary without any guesswork.

Common Pitfalls to Avoid

An improperly established chart of accounts can lead to inaccurate data and reports, making it difficult to properly understand the financial health of your business. Inadequate automation of accounting and accounts receivables processes increases the risk of manual errors or miscommunications between departments, leading to delays in payments that could hurt cash flow and customer relationships.

Additionally, not regularly monitoring financial reports can result in a lack of visibility into key performance indicators like gross profit margins, day sales outstanding (DSO), or net income figures that are essential for effective decision-making. These factors all contribute to a less efficient operation with potential losses due to missed opportunities resulting from an incomplete understanding of finances.

In order to avoid these common pitfalls, breweries should focus on setting up their accounting systems correctly from the start by choosing the right software solution and creating a detailed chart of accounts tailored towards their specific needs. Automation tools like Notch should then be utilized wherever possible in order to save time while ensuring accuracy when dealing with invoices or other transactions related to accounts receivable activities. And finally, regular oversight over financial reports will help ensure information is being tracked accurately, so businesses can make informed decisions regarding their operations.

By following these steps with the help of technology, breweries will ensure they have an effective system in place that allows them manage their finances more efficiently.

Benefits of Using Technology for Brewery Accounting

The use of technology in brewery accounting can provide a number of benefits to help streamline the financial management process. By automating tasks, businesses are able to save time and money while also improving accuracy and efficiency. Automation can reduce manual labor associated with entering data or tracking down invoices by integrating existing systems such as Quickbooks or Xero. This allows you to get paid faster, and eliminates potential errors when dealing with large amounts of data, so your time can be redirected to higher value work.

Further, custom reports on accounts receivable activity such as overdue balances or aged receivables helps managers make better decisions when it comes to setting credit terms or evaluating risks associated with certain customers/segments and ensures operations remain profitable moving forward.

Finally, automatic reminders sent through these programs will help ensure timely collection of payments from customers, so cash flow remains steady throughout business cycles. All these features combined create an environment where mistakes are minimized while providing greater insight into financial performance over time – making it easier than ever before for breweries to stay ahead!

A comprehensive accounting system helps you remain profitable.

By taking the time to properly set up brewery accounting and automating the accounts receivables process, breweries are able to reduce manual labour and improve accuracy when dealing with large amounts of data. Accounting software and automation tools for breweries allow businesses to generate custom reports, giving them greater insight into financial performance over time. Additionally, automated reminders sent through these programs will help ensure timely collection of payments from customers so cash flow remains steady throughout business cycles. All in all, setting up a comprehensive accounting system helps reduce mistakes while making it easier for breweries to stay on top of their finances, maintain customer relationships, and remain profitable in the long run.

Nicole Fletcher
Senior Financial Analyst for Hospitality and Foodservice Industries

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