Taking the Fear Out of Brewery/Distillery Accounting
In my practice, I often see brewery owners who have a lot of questions regarding their books and accounting in general. They are uncertain about what makes their accounting system work and how to find the answers hidden in the financials. That is why some people shy away from accounting believing it to be “someone else’s problem.” I believe that mastering your financials is essential to gaining a true understanding of your business. You can’t steer a ship if you don’t understand how to navigate. That is why I partnered with Live Oak Bank to present a primer on financials and the accounting system in general.
The topic is a broad one and it is hard to do justice to the subject matter in under an hour. We covered a whole lot of ground, but that is why we’ve created a lot of resources that you can use to absorb the information at your own pace (be sure to download the account balance cheat sheet). Truth be told, it has taken me years to be comfortable with the natural signs in a journal entry, so it's ok to struggle with it for a while. I only become comfortable with the natural balances once I had to do journal entries on a daily basis. There is a beauty in double-entry accounting. Trust me, it is worth the struggle to understand it.
Study all of the Financial Statements Related to Your Craft Beer Company
The webinar is structured along a logical path. We discussed the purpose and use of financial statements and how they fit into a business structure. We covered the essential building blocks of accounting (what is a debit and credit anyway?) and then studied each of the major financial statements with an eye to understanding trends (what is the difference between a cash forecast and a statement of cash flows? How does the income statement and balance work together anyway?). We included the S-1 of Ballast Point in the webinar. Yes, you too can try to figure out the selling price of that transaction….
Understand How Banks Read Financials
Putting all of that knowledge together, we studied the various readers of the financial statements and gained an understanding of all of their needs. Live Oak Bank provided us with valuable insight into what they look for when reviewing the financials of a brewery or distillery to make a borrowing decision. It is very powerful to understand what they are looking for before you ask for a loan. I wish that I had the Live Oak playbook before I presented financials to the banks a few years ago.
Have lingering questions about financials terms? Check out the dictionary of financial terms in the resource center. There is also a set of fictional brewery financials complete with ratio analysis. Anything that you wanted to understand is replicated in those financials.