Owning a brewery is truly one of life’s joys. You get to do what you love daily, and you have the admiration of your friends, family, and the general public. Everyone thinks that you are cool. It is easy to get lost in the urgent while forgetting the important—the business needs of the brewery. Accounting seems like such a chore. It is very rigid and very easy to make mistakes. Smart people in suits are often speaking a language that you barely understand.
So, it is understandable that the accounting system is the last thing on a brewery owner’s mind. I’m here to tell you that this is a huge mistake. Every brewery has an operational heartbeat and an accounting heartbeat. For either heartbeat to make real sense, you’ll need to listen to both simultaneously. I often tell my clients that without money there is no beer, and without beer there is no money. Money and beer are the yin and yang of your business.
The operational heartbeat is easy to hear. If the boiler breaks, you can see the steam escaping, and it will call to you to fix it. If the silo gets plugged, all brewing stops until it is fixed. These problems are obvious, and you give them your immediate attention. The accounting heartbeat is much harder to hear. In fact, you can almost ignore it and become deaf to the business side of your company. It is a mistake, but there isn’t an accounting boiler that will make noise and demand your attention. You will need to listen carefully and learn its language. It is only when you are comfortable in “accounting” that you will truly run your business.
Mistake #1 Giving Control to Something or Someone Else
If you are the kind of brewery owner who is “too busy” to understand your books, you have effectively given control to something or someone else. That means that something or someone else is driving the accounting heartbeat. There is always an accounting system (you have to file taxes after all), and if you don’t know what it says, then the bookkeeper or the disorganization will run your company. Even if you formally give control to a staff member, (s)he is usually not empowered in the same way as you are.
One of the hardest parts of running a brewery is listening to all of the different voices in the brewery. The sales voice is a relentlessly positive one. They can do anything as long as you give them what they want. At the same time, your accounting voice will be telling you that giving the sales people what they want is a grave mistake and will doom the company. Who the heck should you listen to? It is really easy to just tune out. It is important to stay engaged until you truly understand what is going on, which will give you solid direction.
Mistake #2 Not Having a Plan
Your company will go where you send it. If you don’t have a published direction, then each manager will steer the company in the way that (s)he sees fit. That is bound for failure, and all the while, you won’t have any idea that the ship is sinking.
Your biggest challenge as an owner is to herd cats in the same direction. How do you do that? By having a strong mission and values that you translate into budgets and numbers. The budget is simply a documented plan for the next year. Understanding all of the variables that create a plan takes time. That is why you should take six months to develop a budget. Once the budget is done and the new year starts, then you make adjustments in a forecast. All of these numbers tell everyone what they should be doing, and they measure how well they are doing it. Everyone will be marching along the same path if they understand what is expected of them.
Mistake #3 Not Continually Matching the Physical World with the Virtual World
The best way to synchronize both heartbeats is to make sure that the virtual world (i.e., accounting system) is always in balance with the physical world. The best way to accomplish this is to keep inventory in balance at all times. Inventory measurement is one of the hardest things that you will ever do at a brewery, so how can you be successful? By empowering the people to touch the inventory and note the changes in the system right away.
Being accountable is not much fun, but it is critical to establishing a balanced system. Don’t make the mistake of asking one person to document all of the daily moves in a brewery. No one has that kind of time. The result is the inventory and reporting are always “off,” and no one will trust the numbers. You will gain true efficiencies if you keep things in balance.
Mistake #4 Not Believing that You are Running a For-profit Enterprise
Your beer is awesome, and people love your brewery. What else do you need? If you don’t understand where the money is going, you run the risk of running out of it. That will stop the brewery faster than anything else. Every decision has a cost and a benefit. You need to make sure that the decisions that you and your managers are making are financially smart. Gone are the days that you can just “brew” your way out of a cash crunch.
Mistake #5 Not Requiring Your Accounting System to Speak Back to You
I hear it all the time. “Are you crazy? It takes all of our energy just to feed the accounting beast. How the heck are we going to get it to report back to us?” An accounting system is many things to many people (just ask the IRS and the TTB), but to you, it is your main methodology for understanding what is going on. Learn how to read financials.
Learn ratios and what is acceptable in your market. Most importantly, set standards and expectations in your books and then report any variances as soon as possible. When you do that, the accounting system is giving you regular updates so that you can course correct as quickly as possible. All is not lost. Even if you hate it, dig in and understand the basics.
Make sure that the financials and reports are drafted in such a way that you understand them. If it looks like another language, then get the education that you need to understand it. The future of your brewery may just depend on it.
Resources for brewery financial planning and management are available for free download on the Beverage Business Builders site at www.bevbizbuilders.com.