Sometimes, it seems that every week, a new brewery appears in the United States because the demand for this heady, foamy drink is colossal. Domestic revenues in the U.S. beer market are projected to reach $77.0 billion in 2024, according to Statista. In such a competitive market, new breweries and long-established pubs must know how to optimize their production processes and stand out. In this article, we will talk about what brewery accounting is and how to manage the financial processes of a taproom.

What is Brewery Accounting, and Why Does it Matter?

Brewery accounting is a system of tracking and managing all of a brewery’s financial activities. It includes carefully recording transactions, reconciling accounts, and performing other activities to provide money management. As we speak about brewery owners, there are reasons to implement accounting:

  • Cash flow control: to ensure that you don’t find yourself lacking funds to purchase malt, hops, yeast, and other ingredients, you need to create an effective accounting policy and a rational financial strategy.
  • To understand fixed and variable costs and how to calculate the cost of goods sold (COGS), pub owners can rely on cost accounting. This way, you can evaluate the effectiveness of each new brewing project and abandon unprofitable programs.

Whether you plan to handle brewery accounting independently or outsource it to a professional, the key to scaling your business is continual financial analysis and to help you avoid operational inefficiencies.

How to Manage Books as a Brewery Owner

The success of your brewing business largely depends on accounting. Let’s consider several aspects of your financial activity:

  • Budget planning: ideally, this process should begin in September and end in December. Discuss last year’s performance with your managers and how the business is moving toward long-term goals this year. Then, the sales representatives must draw up their budgets, based on which production, marketing, and administrative plans are built.
  • Managing employee payroll: besides production, many breweries also open rooms where visitors can taste the drink. It is essential to manage schedules and payroll when interacting with the staff involved in creating the beer and serving it to customers. Use software that will help you track employee time, create work schedules, and execute payroll correctly.

There are other aspects to consider when maintaining the books, e.g., controlling cash flow and identifying opportunities for profit growth. If you are unaware of all the intricacies of financial activities, seek help from a professional accountant.

Specifics of Inventory Tracking for Breweries

Your brewing company needs to track 3 main groups of inventory: incoming ingredients, work in progress, and outgoing batches. In each category, many levers provide close control over your business’s prosperity —once you have the necessary instruments and knowledge.

Breweries have to track inventory to ensure consistency: a consistent taste and feel of each drink, similar shelf life for retailers, quality tracking, and continuous delivery procedures to ensure reliability. This concept underlies good business relationships with distributors and partners.

Effective taproom inventory monitoring will provide you with the following benefits:

  • Constant supply of ingredients and materials, taking into account seasonality.
  • Complete understanding of what stage each batch of beer is at.
  • Notification that on-site and off-site goods are approaching expiration through magnifying glass monitoring and storing accurate data about how long the drink has been in each keg.

Managing microbrewery inventory requires a clear understanding of the current state of affairs: the volume of ingredients stored in your warehouses, the level of readiness of each batch, etc.

Brewery Accounting Best Practices

Common Expenses for Breweries and How to Reduce Cost without Cutting Quality

Running a brewery efficiently and producing unique craft beers in ever-increasing demand comes with many costs. Let’s look at the main groups of expenditures:

  • Equipment costs: a brewery has a lot of equipment, including boilers, conditioning tanks, grain storage silos, keg washers, and water purification systems. Practical work with fixed assets involves their proper capitalization and depreciation.
  • Utility bills: another expense you face every month is paying for gas, electricity, water, garbage, recycling, etc. To reduce this group of costs, we recommend using modern energy-saving equipment.
  • Marketing expenses: a brewery will likely have many marketing expenses, one unique to the industry. Pubs usually have a particular clause about festival costs, which is a great way to inform people passing by your beer range.
  • Purchasing ingredients: beer production involves various ingredients, including hops, malt, yeast, etc. Establish relationships with local farmers to obtain competitive prices and quality materials.

Other categories of expenses to consider include staff salaries, consultations with outside specialists, and additional equipment or services. Recording even small spending is important to creating correct financial documents.

Tips and Reminders for Bookkeeping for Brewery Owners

There is no doubt that bookkeeping is a vital activity in any sector, although it can be a tedious and time-consuming procedure. Fortunately, we have compiled a few recommendations to help you optimize your financial activities, saving time and eliminating hassle.

Software implementation

One method to simplify financial activities is to use special accounting applications to avoid manual data entry and increase the transparency of transactions.

Advanced software can help with various aspects of your accounting, from purchasing ingredients to generating invoices. In addition to synchronizing with data you add to other applications, accounting software allows you to track inventory costs in real time. The application will also help organize data to pay taxes, saving time when filing a tax return.

Track performance metrics

Key performance indicators (KPIs) are essential in measuring your performance and how well you manage your costs in a selected period. We recommend tracking the following KPIs:

  • Cost per barrel: monitor the average price of each barrel of beer produced. It includes both labor costs and the cost of purchasing ingredients to see the total amount you spend on the production of the drink.
  • Gross margin: it is the difference between the cost of COGS and the profit you make from selling them. By tracking this, you will understand the size of your indirect expenses, including equipment rental or maintenance, and how much money you can earn.
  • Current ratio: this indicator shows your business’s ability to pay its bills. Simply divide your assets by liabilities to ensure that brewing generates revenue and is worth developing in the future.

It is important to regularly monitor the listed KPIs to understand your brewery’s current position, plan expenditures accurately, and estimate future production volumes.

TTB and tax reporting

Tobacco Tax and Trade Bureau Reporting (TTB) can be daunting, but it shouldn’t be terrifying. Let’s consider the main points of working with taxes:

Brewer’s Report of Operations is an essential document because all brewers must monitor the movement of products in and out of their customs area. Depending on the size of your excise tax, such a report must be submitted monthly or quarterly.

Excise tax is a mandatory payment that is charged to the brewery, not the client. The tax rate varies depending on the brewery’s annual production volumes.

Be aware of state compliance, as there may be additional regulations and taxes depending on where your business is located.

Final Words

Before the foamy beer ends up in your customer’s glass, many processes must go through, including purchasing ingredients, handling inventory, fermentation, etc. However, one of the critical processes is the taproom’s accounting. Some entrepreneurs may be talented at dealing with numbers and details, but not all do. To avoid errors in financial documents, we recommend delegating the execution of economic work to professionals.

BooksTime specializes in brewery accounting, payroll, and consulting services. With state-of-the-art cloud accounting services, we serve small and medium-sized businesses. Our experts understand the complexities of running a brewery, including legal framework, reporting, and inventory control. Get a free consultation right now!