In 2017 I attended the Brewery Accelerator Workshop in San Diego, California and was available to answer pre-workshop questions for brewery CFOs. The topics included taxes and compliance, outsourced accounting vs. home-grown operations, start-up capital, and operational accounting.
Part 2 gets into outsourced accounting vs. home-grown operations.
Q: As a small brewery, should I outsource my accounting to a company?
A: There are a lot of nice people that will “take the problem” of accounting away from you (FOR A PRICE). The problem is that they are going to want a professional wage and that is a big drag from your operational cash. If you are not careful, professional fees will equal the cost of an extra tank every year. If you have someone who can “keep the lights on,” I would do that until you have a large enough barrelage to hire someone proper.
With that being said, a good bookkeeper is worth their weight in gold. Once the books are setup correctly, the cost to keep it in balance is minimal. Make sure that whoever you choose has experience in not only brewing, but your level of brewing. Professionals like to show their worth by overcomplicating things.
Q: Is it best to hire an accountant early on or handle books in-house?
A: Please see above. Make sure that the books are established on a strong footing (and that structure will grow as the business grows). The best startups have an owner/founder with financial savvy. They are the first accountant of the company. In the beginning, all you really need is to make sure that the “wheels don’t come off” –i.e., that you have accurate cash accounting in an accounting system. I do not advise to try to do your books without a computerized accounting system. QuickBooks online is almost a universal favorite for startup breweries.
Over time your accounting needs will grow into operational metrics and cost accounting with the primary focus being inventory control. You cannot manage a manufacturing division of a company without strong inventory control procedures and practices.
My best advice to you is to get the best help that you can afford within your budget, but retain ultimate understanding and control.
Q: Is it advisable/recommended to hire an accountant to keep financial accountability on brewery operations?
A: Owners often forget that they are the first accountant with financial accountability on brewing operations. I’ve seen owners divorce themselves from the financial reality and try to push it on an accountant “with no street cred’ on the brewery floor. That is a recipe for disaster.
That being said once you grow to a critical mass, it will be extremely important to start building out a team (i.e. 5,000 BBLS). At that barrelage, you are starting to run a true production system and you need to begin to measure production using cost accounting metrics. Don’t hire too early. Organizing the brewery around true manufacturing practices takes time, effort and energy from the whole brewery. A lot of little guys don’t have enough of anything to stretch into real cost accounting.
Q: Is it preferred to learn the necessary skills as an owner?
A: Knowledge = power = control.
If you don’t understand the language of business, you are forced to rely upon others to interpret your books. I advise all of my clients to have a working knowledge of brewing financials. You don’t have to be an expert, but you do have to know enough to gain a “Spidey Sense”.