Navigating CPG Financials: Understanding COGS and Retail Pricing

At Unloop, we specialize in accounting for inventory based CPG Brands starting at $399/month. For Consumer Packaged Goods (CPG) businesses, effective accounting is crucial for understanding financial health, making informed decisions, and ensuring sustainable growth. However, several Online Bookkeeping common accounting mistakes can hinder the success of CPG businesses.

Understanding Revenue Recognition in CPG Businesses

CPG companies face unique financial complexities due to the sheer volume of transactions and intricate revenue recognition processes. High turnover in inventory, complex supply chains, and trade spend management add to the challenge, making accounting functions more demanding. Partner with Expertise Accelerated for outsourced CPG accounting led by our CEO with over 25 years of US CPG industry experience. We specialize in all aspects of the CPG business including bookkeeping, trade promotion management, logistics, income statement supply chain, and production planning.

Mind the cash flow

Companies with high operating leverage tend to do better in bull markets and periods of high growth, as profits grow faster than revenue. Still, because of the fixated nature of the cost structure, they tend to get wiped out much quicker in economic downturns. We use this financial term to describe how sensitive a company’s profitability is to changes in revenue. The answer to that question comes down to cost structure since the difference in revenue and profit is cost. A well-organized COA speeds up bookkeeping and posting of GAAP accrual entries and other adjustments, making month-end reconciliations easier to complete.

SERVICES

• Expect your sales reps to acknowledge, review and understand any deductions that come through.
• This information is important for tracking patterns of returns and identifying potential issues with products or the sales process.
• These companies also face a high degree of competition and must manage their costs carefully to maintain profitability.
• CPG companies typically have high volumes of transactions, which can make accounting challenging.
• Get expert advice from the Propeller team to navigate the changing CPG industry dynamics.
• Gain confidence in your financials with time-saving support from consumer business specialists.

Accurate and consistent information ensures accurate forecasting and helps prevent overspending. You can create a better roadmap, based on tight data sets that guide efficient growth and scaling. CPG companies must assess the likelihood of inventory becoming obsolete and create inventory reserves to account for potential losses.

• 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.
• Your data will tell you everything currently happening in your business, from your most popular products to underperforming sales channels.
• The company invested in a state-of-the-art manufacturing facility ten years ago, recorded on its balance sheet at $50 million.
• In either case, the engagement is led by its Connecticut-based team and executed by handpicked and intensively trained offshore accounting & finance professionals.
• High quality services tailored to specific business needs at fraction of the US cost.

Trade spend can be defined as the amount of money manufacturers provides to a retailer for the purposes of selling a product to consumers, which is typically measured as a percentage of sales. Sign up to stay up-to-date with the latest accounting regulations, best practices, industry news and technology insights to run your business. We offer flexible pricing models tailored to your needs, including fixed, hourly, or Full-time employee (FTE) based options. Maintain healthy supply of cash across operational spectrum with Expertise Accelerated’s support on support on working capital management. Ensure cash adequacy while meeting operational and strategic commitments with Expertise Accelerated’s support on cash flow projections. Robust bookkeeping proves your ability to manage finances effectively and generate consistent profits.

• Given that inventory challenges are prevalent in the CPG / Food & Beverage industries, our hands-on approach includes thorough site evaluations to identify and eliminate inefficiencies.
• Expertise Accelerated offers high-quality, affordable offshore professionals resources that provide excellence in accounting, finance and supply chain management to its valued clients.
• We help businesses thrive with our accounting and finance services that are customized to your needs.
• If you don’t know your true production costs, it’s tough to price your products right and protect your margins.
• You’ve likely learned running a consumer packaged goods business means jumping over a maze of financial hurdles.
• If you net the entire trade spend against revenue, you’d end up with 50% gross profit margin.

Do You Need to Elevate Your Reporting?

You can use your COA cpg accounting to create customized reports that streamline analysis and decision-making. As you get more retail partners for your brand, managing trade spend becomes more critical in your daily operations. You’ll have multiple partners  —  each with their own promotions, spend calendars, order volumes, and deductions.