When it comes down to it, the bottom line is an integral part of any business. It’s not always common knowledge, but the phrase originates from the final total of an account or balance sheet … literally the bottom line of the paper. Brown Schultz Sheridan & Fritz (or BSSF for short) are certified public accountants and BOP associate members. As CPAs, they are literally in the business of getting to the bottom line.
BSSF has been advising businesses for more than 20 years, and in addition to accounting, these experts also offer services such as business valuation and human resources consulting. One thing all of these facets of business have in common is that when they’re effectively managed, they can maximize business profits and support sustainable growth. The company counts a number of breweries among its clients.
So how can breweries plan for success in these areas? To find out we got in touch with Jeshanah McLeod, BSSF’s marketing director; she consulted with BSSF’s Craft Beverage Group to get us the answers.
“We can’t stress enough how important long-term planning is to both new and established locations, especially when it comes to cost accounting,” reflected Jeshanah.
“For new breweries, business planning at the beginning of the journey is crucial. Brewers are passionate about brewing, and so the business side of things can sometimes sit on the backburner,” he added. “But we see challenges down the road for brewery owners when they don’t do the work up front and take the time to understand cost accounting. Owners need to be able to understand what it costs to run their brewing operations so that they price their products correctly – and so that they don’t end up burning out because they try to save costs by doing all the work themselves.
“It can be exciting to start a brewery, and as a brewer, you want to get to the business of brewing. But make sure you do your business planning first and get advisors involved along the way. You want to make sure that you’re not making decisions that will hinder your ability to be successful down the road.”
Jeshanah offers sage advice. Opening and operating a brewery often means that you’re wearing multiple hats. This can make the task of working out every detail for business accounting more difficult.
While some business owners may have extensive accounting knowledge, this is not always the case. “The scenario we see the most is when owners don’t get their advisors involved from the beginning,” Jeshanah said. “Sometimes it leads to an owner making a decision without fully understanding regulations, and then they end up hurting themselves later on down the line. But if that does happen, the best thing an owner can do is find an advisor that they trust to help them work through the issues.”
It’s important for existing breweries to perform cost accounting as well, especially when they’re considering expanding the business. “There needs to be a market demand in order to expand, and brewery owners should have a good handle on what expanding will do to their current product costs.”
Business valuations can also play a part when considering a brewery expansion. “Owners use a valuation to help assess the brewery’s growth, get additional financing by being able to prove the value of a business and for exit planning once they get to that stage in their business,” Jeshanah explained.
For new breweries, Jeshanah relates that it’s good to have books and records set up in their entirety before you even begin brewing. This would typically come after choosing an entity and evaluating financing. “Brewery owners will want to make sure that piece is out of the way so that when they are ready to open their doors, they won’t have to go back and correct things.”
Correcting finances and accounting later down the line can be a difficult obstacle. On the other hand, understanding accounting can be of great value beyond just straightforward profit and loss. It’s important to note that many breweries are utilizing tax credits as a means to help their business.
“We’re seeing a trend of brewery owners focusing on tax credits, such as research and development credits and the Pennsylvania Malt Beverage Tax Credit, to help offset their tax liability and save money where they can,” Jeshanah added. Savvy business owners can leverage things like tax credits to their advantage. Laws can change quickly, though, as can available credits, so it’s important to invest in understanding the current state of affairs and reassess regularly.
The Brewers of Pennsylvania is a nonprofit trade association that brings together leaders of Pennsylvania-based breweries in order to promote and protect the brewing industry in the state. Established in 2011, the Brewers of Pennsylvania serves the consuming public of Pennsylvania by encouraging brand diversity in the market. We believe in the nobility of brewing and hold dear the great traditions and history of Pennsylvania brewing.
Featured photo: Brewers of PA; all other photos: BSSF
