It’s a common misconception that craft breweries don’t need to worry about managing cash flow. Some believe that brewers don’t have to pay high rent, large utility bills or any other bills that drive traditional businesses into financial straits. However, we know that couldn’t be further from the truth!
You still have expenses and need to pay attention to them if you want your business to stay in the black. Here are some tips on managing cash flow at your craft brewery with ease.
Review Revenue and Expense Often
Consistently monitoring your cash flow is one of your most important financial responsibilities. You must assess how much money you have available, the amount of fixed and variable expenses you will face, the amount of money you will earn, and when that money is available.
Remember that even local weather and traffic can impact your craft brewery business. Plan for some wiggle room that you can fall back on if you run out of cash to avoid uncertainty.
At the very least, you should review these figures weekly. When sales are down, or expenses are up, it’s always easier to spot trends sooner rather than later. From there, you can adjust your business accordingly.
Better Inventory Control
Improving your inventory control systems should be a top priority. A good rule of thumb is to keep enough items in stock to last about a month. Beyond that, you risk amassing a large amount of excess inventory, which can be detrimental to your business. Here are a few reasons why you don’t want excess inventory:
- Your cash is tied up in inventory that isn’t immediately needed. This means you’re unable to use these funds for other expenses.
- Excess inventory can result in extra warehousing costs or it can take up needed space.
- Too much inventory can result in waste due to spoilage of raw materials.
- Excess inventory can result in waste due to phasing out excess packaging materials for new brand releases.
Accept Various Forms of Payment
One of the most frequent mistakes brewers make when managing cash flow is not accepting various forms of payment. While it’s possible to have your primary point-of-sale register set up for cash only, customers won’t appreciate being turned away and will likely take their business elsewhere.
Keep your patrons happy by accepting credit cards, which are generally easier and more convenient than paying with cash. You can also consider offering other ways to pay, such as mobile apps or gift cards.
These options allow you to receive payment in advance, giving you a better chance of managing cash flow daily.
Cash Versus Credit
The old cliché “cash is king” still holds when running and expanding a brewery. Cash reserves above and beyond those required for day-to-day operations should be seen as capital that can be utilized to fund expansion or reinvestment in the brewery.
Make sure that you have a clear idea of how much operating cash you will need to run your brewery before considering cash versus credit.
Both can impact your bottom line, whether you’re short on cash or short on credit. It’s essential to know how much cash is coming in and when and how much inventory you have (and when it will be gone).
This way, you can tell if you need to keep an eye out for sales or expand your client base to bring in extra cash. If you’re too far in debt and struggle to make payments, work with a lender to get organized.
Review Your Production Costs
When it comes to managing cash flow at your craft brewery, cost of goods (COGS) are vital. COGS are considered the raw material ingredients and packaging material costs that go into making each batch of beer. You should review your cost of goods for every batch and check for any changes or trends over time. From there, you can make pricing decisions based on COGS to ensure that each batch of beer makes a healthy gross profit margin.
Inspect Your Debt Profile Regularly
When determining how to fund development, it’s essential to consider the debt you already have and how much you’re comfortable adding to it. A small business’s credit rating will suffer if it takes on more obligations. Nobody wants that!
Not to mention, your ability to acquire a loan and get favorable conditions will be influenced by your current debt and other financial and business factors.
Credit may be the best option if you have a manageable level of debt and can get a line of credit at a reasonable interest rate. Even if you or your lender is concerned about your debt, it may be best to create the discipline of utilizing cash to support your company’s expansion carefully.
The Bottom Line
Cash flow is a significant issue for small business owners, including proprietors of small craft breweries. If you don’t handle your operating costs and cash flow, in general, well, they might eat away at your profits before you know what happened.
However, the mentioned brewery cash flow management tips can help you stay on top of cash flow to know where and when it will be coming back to you. All the above tips can work perfectly for a craft brewery. But be sure to weigh your options and go with what works for you.
Beer30 for Craft Breweries
Running a small business means dealing with cash flow daily. It also means finding ways to reduce your expenses and optimize income. With Beer30 brewery management software, brewers can manage cash flow by optimizing their planning and purchasing.