Although CPG makers generally enjoy healthy margins and robust balance sheets, they must continuously fight for shelf space in stores. Even well-known companies must continuously Certified Bookkeeper invest in advertising in an ongoing effort to increase brand recognition and stimulate sales. Understanding the gross profit generated by each sales channel is crucial for resource allocation and strategic focus. Once your P&L is structured effectively, the focus shifts to monitoring KPIs that are pivotal for decision-making and strategic planning.

Understanding Consumer Packaged Goods (CPG)

Growing a Consumer Packaged Goods (CPG) brand can be both exciting and challenging, especially when financial metrics like Cost of Goods Sold (COGS) and retail pricing start to feel like an overwhelming sea of numbers. But these concepts aren’t just industry jargon—they’re the foundation for making profitable decisions that lead to sustainable growth. In this guide, we’ll break down the essentials of COGS, pricing strategies, and financial management tailored specifically for CPG startups. When I work with clients on COGS, I set up enterprise resource planning software. Then, we dive into inventory management tools, cost accounting methods, and automated procurement systems. These systems automate the process of tracking every cost involved in production, from raw materials to logistics.

• Managing business accounting for CPG brands means investing in tools that give you the data—and insights—you need to make intelligent business decisions.
• We have a detailed guide on the 5 best accounting software for cleaning businesses.
• Companies that want to develop best-in-class departments can take strides by asking the right questions and taking care to work their way to the right answers.
• A handful of expenses fit between gross revenue and net revenue on the income statement.
• These systems automate the process of tracking every cost involved in production, from raw materials to logistics.

Statement 3: Statement of Cash Flows

Say you’re a specialty coffee brand that’s landed a deal with a major retailer. The retailer places a large order, but their payment terms stretch to 90 days. With the right financial connections, you can secure better financing options or lines of credit to keep operations moving smoothly without cash flow issues.

• When you implement strong accounting practices, your products fly off the shelves and have sustained growth.
• As such, sales returns and allowance accounts should be established and maintained to properly reflect expected sales, COGS, inventory, and accounts receivable within the period on both the P&L and Balance Sheet.
• In a CPG business, you have to track tangible products and store and sell them.
• Once your P&L is structured effectively, the focus shifts to monitoring KPIs that are pivotal for decision-making and strategic planning.
• While any form of accrual management is common in the CPG world, we recommend a hybrid approach for the most valuable insights in reducing profit leakage.

Inventory Management Solutions

Eric Sonsino highlights several essential metrics that CPG cpg accounting entrepreneurs should track meticulously. A cash receipts and disbursements forecast is a simple way to review what is coming in and going out of the bank, as well as preparing a short-term forecast of the expected activity. Breaking through in the consumer packaged goods (CPG) industry takes more than a great product. Your CPG pricing strategy should balance consumer expectations with financial goals, allowing you to remain competitive and profitable.

Wrap-up: Getting Your Chart of Accounts Right

CPG accounting isn’t just about crunching numbers; it’s the engine that keeps your business going. As we have seen, the most successful CPG businesses don’t have the best products; they have the best financial processes. While any form of accrual management is common in the CPG world, we recommend a hybrid approach for the most valuable insights in reducing profit leakage.

Discover a new vision for trade

This information takes time to set up, but once you do, it pays dividends in the long run. It will help you keep your business ledger organized and reduce the work necessary to make sense of your finances. A chart of accounts is a categorization of your company’s general ledger for both the Income Statement and Balance Sheet. As required by any accounting software, they include your cash on hand, inventory information, revenue sales, equipment, accounts receivable, accounts payable, and other types of business transactions and assets.

Then use those same inflows and outflows to map out the next week, month and quarter. Consider this a rough guide, so it doesn’t have to be perfect, but rather directional in nature. It can even help to work through a full year of forecasting cash this way. Companies that want to what are retained earnings develop best-in-class departments can take strides by asking the right questions and taking care to work their way to the right answers.

Behind every successful CPG company lies a complex web of financial management, inventory valuation, and accounting processes. By mastering COGS, pricing strategies, deduction management, and efficient marketing, emerging CPG brands can thrive in a competitive market. With a focus on financial intelligence and operational efficiency, your brand is poised for sustainable success. Another underutilized approach is demand forecasting integration with production scheduling. Too often, brands produce based on past trends, but integrating real-time demand signals into your financial strategy can keep production aligned with market demand.

Data is everything—if it’s consistent

• In 2009, though consumer spending on cosmetics overall declined, nail polish sales grew by 14.3%.
• For example, if you put shipping and fulfillment below the cost of goods and marketing and put it into an SG&A category, you have now mixed a variable expense with fixed overhead.
• It’s simple to use   —   you only recognize a sale when a store pays you.
• Her extensive industry knowledge and empathetic approach drive sustainable growth and success for the businesses she supports.
• Our team can also assist with budgeting, forecasting, and cash flow management, enabling CPG companies to make data-driven decisions and optimize their financial health.
• Our team of experts has years of experience in the CPG industry and can provide customized accounting solutions that fit your business needs.
• Lori’s unique value comes from her hands-on experience working in both restaurants and food service, giving her a firsthand understanding of the challenges faced by business owners and employees alike.

We help CPG manufacturers optimize inventory management by implementing cost-effective processes, providing guidance on negotiating with suppliers, and identifying opportunities for supply chain consolidation. With multiple years of specialized experience, CJBS is a leading authority in the Consumer Packaged Goods (CPG) and Food & Beverage sectors. Managing business accounting for CPG brands means investing in tools that give you the data  —  and insights  —  you need to make intelligent business decisions. Vividly offers tools that provide visibility into trade promotions to help you understand where your money goes and streamline and optimize trade promotions.