CPG, aka Consumer Packaged Goods, includes products consumers use daily, such as food products, clothing, beauty items, and so on. The sector is one of the largest in North America and contributes to $2 trillion in the US alone. Figuring how to find the right accounting firm for your company can be difficult.
With historical data available, CPG owners can identify trends, assess financial health, and set future goals more effectively. At Unloop, we specialize in accounting for inventory based CPG Brands starting at $399/month. Without careful oversight, you might find your CPG brand is stuck with too much stock that ties up cash or not enough to meet customer demand. A CPG-specialized accountant analyzes your sales patterns, product turnover, supply chain costs, seasonal demand fluctuations, and storage expenses to pinpoint inefficiencies in how inventory is managed.
We offer services such as accounting, tax planning, and financial reporting, which streamline operations. 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. Whether you’re self-manufacturing or working with co-packers, keeping accurate financial records is essential to understanding your business’s performance, making informed decisions, and managing cash flow. A solid accounting foundation will also prepare you for future growth and investment. The problem with this accounting method for CPG companies is that it doesn’t track unpaid invoices, which makes it difficult to get a complete picture of your finances.
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. With high upfront costs for inventory and demanding production schedules, cash flow is often tricky for CPG brands. It allows brands to offer slight discounts in exchange for faster payments, which can drastically improve liquidity without impacting long-term profitability. Known for its high sales volumes, slim margins, and rapid inventory turnover, the CPG industry poses unique challenges for accounting. Missteps in financial management can quickly escalate and give rise to problems with inventory valuation, compliance with tax regulations, and more.
- Propeller offers a fractional model that can be a cost-effective alternative to hiring full-time talent too early.
- It includes the accurate tracking and analysis of inventory, sales and cost of goods sold, forecasting and budgeting, cash flow management, pricing strategy, and other components necessary to maximize profitability.
- Accurate and transparent financial reporting is not merely a regulatory obligation but a strategic asset that builds credibility and trust with stakeholders.
- It will be a bigger industry, with much larger global players and more competition from up-and-coming companies in emerging markets.
- At Balanced Business Group, we specialize in providing the CPG accounting expertise and finance services that founders need to stay ahead in a competitive market.
- Companies with high fixed cost structures (SaaS, Manufacturing) can grow revenues without growing expenses as much, meaning the net income expands faster.
That could involve optimizing marketing campaigns for high-performing products, adjusting pricing strategies, or even discontinuing low-profit items. Accurate bookkeeping reveals which products are your profit powerhouses and which are duds. Detailed financial records allow you to conduct insightful profitability analyses.
How Purchase Orders Benefits Startups
Specifically, the COA lists account numbers and account descriptions grouped by account types. A typical COA starts with balance sheet accounts (YTD assets and liabilities) and lists revenue and expense account numbers. You can allocate resources strategically, identify investment opportunities, and determine how best to scale your business. Automated tools can also handle the complex task of inventory valuation to verify the accuracy of your financial statements. That, in turn, provides a clear picture of the true value of your stock, leading to better financial planning and decision-making. Without clear insight into incoming and outgoing cash flow, it’s easy to lose track of your finances.
These documents are not just transactional in nature but are also a rich source of insights for strategic decision-making throughout the year. Even internal employees with years of CPG experience don’t (and can’t) develop their expertise as deeply and completely as nDepth’s experts. Our pros work with multiple clients throughout CPG, and are always learning new best practices and regulatory changes. Your business needs a firm that can help mitigate risk and fraud by segregating duties to protect from unauthorized spend. If you would like to learn more about how we can help your CPG company, please reach out via email (email protected) or schedule a call via the Contact Us page on our website.
Manage deductions with sound strategies
For many CPG brands, maintaining a positive cash flow can be a big challenge, especially if you’re paying for inventory upfront but waiting for payments from retailers. They include your cash on hand, inventory information, equipment, accounts receivable, and other types of business transactions and assets. But sub-par corporate accounting practices won’t only make handling your finances harder to run your company today—it will also impact your ability to grow and thrive in the future.
Navigating Complex COGS Calculations
If you mess this up, your cash flow can be disrupted, and your business may not be able to grow properly. Navigate the dawn of a new year with insights on cash flow management, as we unveil strategies to empower CPG brands for the challenges and opportunities that lie ahead. Punch partners with eCommerce businesses, offering bookkeeping and CFO consulting services. They work with customers to deliver rolling forecasts and real-time financial insights while modernizing their bookkeeping systems and time-tracking processes.
By hiring us, you also save on time and training an in-house accountant, which includes providing benefits, maintaining accounting software, and building out your infrastructure. While consumer demand for consumer packaged goods (sometimes known as CPGs) largely remains constant, it is still a highly competitive sector. This is primarily due to high market saturation and low consumer switching costs, where consumers can easily and cheaply switch their brand loyalties depending on price or quality (real or perceived).
The Ability to Leverage a Deep Industry Network
In addition, CPG companies must account for any indirect costs, such as packaging and shipping, that are included in the cost of goods sold. The Financial Accounting Standards Board (FASB) has issued Accounting Standards Codification (ASC) 606, which provides guidance on revenue recognition for all companies, including CPG companies. The core principle of ASC 606 is that revenue should be recognized when a company satisfies a performance obligation by transferring a promised good or service to a customer. Debt financing allows businesses to maintain full ownership while providing predictable repayment terms, tax advantages, and improved creditworthiness, making it a strategic choice for growth. The new offerings streamline and automate manual tasks, empowering brands to reduce errors, save time, and focus on growth.
Partnering With a CPG Accounting Expert for Success
- The right accountant or CFO can help businesses mitigate risk, save time, and make sound financial decisions.
- But sub-par financial accounting practices won’t only make handling your finances harder to run your company today — they’ll also impact your ability to grow and thrive in the future.
- 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.
- As lenders and investors evaluate your business, they’ll look primarily at revenue growth, gross margin, liquidity, asset efficiencies, and leverage.
- Additionally, misclassifying promotions, giveaways, and discounts can inflate revenue figures, leading to inaccurate financial reporting.
In 2009, though consumer spending on cosmetics overall declined, nail polish sales grew by 14.3%. Distribution partners are some of the most important parts of scaling up a small business or startup. Discover how auditing your purchase order process can lead to improved efficiency and accuracy in your supply chain. Selling wholesale is one of the most important steps that a small business can take towards greater success.
To create these types of seamless, frictionless experiences for consumers, decision-making cannot be siloed by brand or channel. And companies often need external partners to deliver an entire ecosystem of value to consumers. The most successful consumer-centric companies have invested heavily to create highly integrated, customized experiences for their best customers. Good bookkeeping can improve financial transparency for any ecommerce or CPG startup, streamlining business growth and ensuring proper compliance. It also helps leadership make better, more informed decisions on financial operations and how to position the business in the future. A chart of accounts is a categorization of your company’s general ledger for both the Income Statement and Balance Sheet.
Another important step is to regularly review and analyze your financial data in order to identify areas where you can cut costs or optimize spending. This could involve negotiating better deals with suppliers or cpg accounting finding new vendors who offer more competitive pricing. Next, establish clear communication channels between your accounting and procurement teams to ensure that everyone is on the same page regarding budgets and spending. The CPG industry is highly competitive and constantly evolving to meet the changing demands of consumers.
Where Are Consumer Packaged Goods Sold?
Accrual accounting makes it easier to analyze your finances from period to period and understand your margins. Navigating the complex world of CPG regulations is another area where a specialized accountant can save you headaches — and money. From FDA labeling requirements for ingredient disclosures and health claims to food safety regulations like the Food Safety Modernization Act, CPG businesses face strict compliance rules. Even California’s Proposition 65, which mandates warning labels for products containing certain chemicals, can catch brands off guard, leading to costly fines if not properly handled.
Unlike service-based businesses, CPG brands deal with tangible products that need to be tracked, stored, and shipped. Accurately managing inventory is critical for ensuring that you don’t run out of stock or tie up too much capital in excess inventory. Accountants and CFOs offer more than just the preparation of financial statements, tax returns, and payroll management. They are strategic partners, adept at providing guidance on budgeting, forecasting, and efficient cash flow management.
Understanding what makes CPGs unique is essential for companies operating within this industry. By keeping these factors in mind when developing accounting and procurement processes, businesses can better position themselves for success in the long run. One of the significant challenges in financial reporting is managing the differences between accrual-based accounting for investors and cash-based accounting for tax purposes. Alice and Eric provide clarity on this subject, emphasizing the importance of understanding and correctly applying both methods. As a consumer packaged goods (CPG) entrepreneur, maintaining precise financial oversight is akin to navigating a complex landscape filled with intricate details, regulatory requirements, and investor expectations.