CPG Accounting Industry Pitfalls

As a leading management consulting firm, we bridge the gaps between finance, technology, operations, and risk management, for companies to thrive during every lifecycle stage. While there is no magic bullet for these common problems, simply staying ahead of them can minimize challenges to the P&L and keep trade spend from spiraling out of control. We walked through how to set up a business operating system that supports brand growth and keeps operations running smoothly.

• This means looking beyond short-term financials to understand what generates enduring, long-term, sustainable value in a world where people are more empowered than ever to choose the companies with whom they engage.
• Robust bookkeeping proves your ability to manage finances effectively and generate consistent profits.
• Staying up-to-date with financial reporting allows founders to analyze historical data, set future goals, hold themselves accountable, and make informed decisions based on current cash flow status.
• We know that managing inventory and supply chain costs are some of your biggest concerns in the manufacturing industry.
• CPG companies must assess the likelihood of inventory becoming obsolete and create inventory reserves to account for potential losses.
• For example, if a buy one, get one free coupon is redeemed for an item with a typical sales price of $2.00 and a related cost of $1.00, the company should record $2.00 in revenue and $2.00 in cost of goods sold.

Planning for the Future

This document tracks the movement of money in and out of your business over a certain period. Keep in mind, this document is not as helpful for managing the weekly cashflow needs for your business. Your balance sheet helps you see how much liquidity you have, which can help with decisions like whether you can afford to make a big investment in new equipment or scale up production. Break down blockchain’s complex financial and regulatory framework and ensure compliance with industry regulations. But managing your company’s finances requires multiple skill sets across different roles with inconsistent workflows.

Improve Cash Flow

• As trade promotions are created by the sales team, the planned trade promotion accrual is generated and actualized as trade promotion deductions come in.
• Inaccurate COGS can lead to mispriced products, shrinking margins, and poor financial visibility, which makes it difficult to identify where profits are lost or how to adjust pricing to maintain profitability.
• You’ve likely learned running a consumer packaged goods business means jumping over a maze of financial hurdles.
• Future Ready CPGs will be a new breed of human-led, data-fueled businesses, able to reimagine, grow and endlessly reengineer themselves effortlessly.
• So, even if business goes slow in some months, you get an idea of how much you can make.
• With the right financial connections, you can secure better financing options or lines of credit to keep operations moving smoothly without cash flow issues.

Today, Propeller’s 250+ full-time professionals on three continents are proud to be considered the premier finance and accounting partner to many of the most iconic emerging companies in every category we specialize in. EA’s deep understanding of the challenges these industries face ensures hassle-free bookkeeping and significant payroll savings. Ensure seamless vendor payments, supplier invoice tracking, and revenue collection for optimized cash flow. Our team can handle all your bookkeeping and accounting needs, including accounts payable and receivable, bank reconciliations, and general ledger maintenance. Similarly, CPG companies may also face impairment issues related to their cpg accounting inventory.

Why You Need a CFO for Inventory Management

• CPG companies can’t run effective operations without insight into their cash flow.
• If you don’t know your true production costs, it’s tough to price your products right and protect your margins.
• Gain confidence in your financials with time-saving support from consumer business specialists.
• The real value of working with a CPG-focused accountant is the ability to anticipate challenges before they become obstacles by leveraging deep industry knowledge and a network of CPG-savvy contacts.

If you’re experiencing confusion about priorities and objectives or bogged down by the nuances of the day-to-day accounting operations, you’re not alone. 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. Move accounting work to the pros, and get more time and resources for your core business activities. Still, generally, with half the revenue, you don’t need as many employees anyway so you can return to your normal profit margin, albeit at a lower scale here, with relative ease. Companies with high fixed cost structures (SaaS, Manufacturing) can grow revenues without growing expenses as much, meaning the net income expands bookkeeping faster.

Challenges in Accounting for CPG Companies

This approach to profits and losses gives you a clear idea https://www.bookstime.com/articles/what-is-an-ein-number-and-does-your-business-need-one of where your trade-spend dollars are going. It also helps you understand the true gross profit margin for a given product. After all, when you include your marketing costs that are separate from sales agreements in this calculation, it makes your gross profits seem lower than they actually are. Be sure to adequately staff your accounts receivable and deductions teams, so they can provide timely and relevant data that enables management to effectively evaluate trade spend.

Managing finances for a CPG business can be complex, but you don’t have to do it alone. At KMK, we handle everything—from inventory tracking to trade spend analysis—so you can focus on growing your brand with confidence. Financial accounting and reporting can be complex and time-consuming for CPG companies, particularly when managing complex supply chains, inventory management, and forecasting demand. The Consumer Packaged Goods (CPG) industry is a dynamic and competitive market, where companies need to stay on top of their finances to succeed.