Consumer Goods Accounting, Audit, Tax, & Advisory Services Cherry Bekaert

Regions with large, youthful populations like Africa, Asia, and the Middle East present major opportunities. Culturally resonant branding and product localization enable relevance across diverse markets. For instance, brands attuned to local tastes launch products like spicy potato chips in India or red bean ice cream flavors in China. Affordable sachet packaging makes CPG products accessible to all income levels in emerging markets. For example, if you put shipping and fulfillment below the cost of goods and marketing and put it into an SG&A category, you have now mixed a variable expense with fixed overhead. It will inhibit you from identifying operating leverage in the business (discussed below).

Spotlight on tax

The features for compliance and monitoring of spend management enable visibility, improved processes, and sustainable sourcing. A deluge of disruptive innovations has opened up avenues for consumer packaged goods and retail companies to improve market share and margins. Adaptability, agility and creativity are the most important characteristics for a company to survive. Companies with low fixed costs (CPG industry) generally scale expenses as revenue grows. Isolating marketing as a % of sales, MER, or ROAS, or however you choose to assess marketing efficiency, will quickly enable you to identify trends and seasonality within your business. A well-organized COA speeds up bookkeeping and posting of GAAP accrual entries and other adjustments, making month-end reconciliations easier to complete.

Advantages of Partnering with Specialized CPG Accounting Experts

The convenience of subscription and recurring delivery models suit routine CPG replenishment purchase patterns. Personnel & fixed costs are a small portion of the P & L, as we just said, so you should be looking to leverage the fixed costs as much as possible since there isn’t much to begin with. This is a really important one, particularly in CPG, because this is where the operating leverage comes in. Before we can talk about the next section, we need to talk about and explain operating leverage. So, USPS tends to hike rates yearly, but that doesn’t mean your cost to produce that lotion increased by 3%. Isolate the variables to determine what is impacting the earnings of the business.

Leading Brands and Their Impact

• During periodic controversies like food recalls or misleading claims, sincere brand outreach prevents isolated incidents from permanently sinking reputation.
• Going forward, they need to balance long- and short-term perspectives while leading with strategy.
• It will help you keep your business ledger organized and reduce the work necessary to make sense of your finances.
• The post-World War 2 economic boom was a golden age for major CPG companies, as rising incomes and suburban growth powered consumption.
• The pet company produces supplements aimed at improving hip and joint health in dogs.
• Our team of sector-specific accountants will help you navigate industry challenges and provide tailored solutions for your accounting needs.

You need to cpg accounting familiarize yourself with the different CARES Act types of charges, including fulfillment, storage, disposal, and returns. Then, understand how each expense applies to your products based on size, weight, and storage duration. Set up a monthly review process as well to check these fees and ensure they’re recorded correctly in your financial statements.

CPG companies will continue to pay more for the materials they transform into products. Commodity prices are forecasted to remain elevated, at 20–40 percent above 2019 levels, at least until 2025. Food commodities will be challenged further, as climate change effects build. Out of 21 major food commodities analyzed, 85 percent are expected to face moderate or substantial increases in drought exposure, which is likely to lead to lower crop yields and more frequent crop failures. Several crops are in an acute position, in which they face both substantially increasing drought risk and highly concentrated footprints, including almonds, olives, hops, and cocoa. These changes in climate are expected to increase volatility in supply and price, necessitating shifts in where crops are grown and the need for further climate-resilient growing practices.

• For instance, in the 1920s and 30s, radio and print advertising campaigns for brands like Palmolive and Maxwell House coffee helped drive mass consumption.
• A poorly organized COA will prevent you from understanding how the variables of your business move together and may make detrimental decisions.
• In other words, cash flow management looks at your past, present, and future cash to guide various business decisions.
• To avoid the above accounting mistakes, CPG businesses need a competent bookkeeper.
• Volatility from weather, shifting tastes or production snags rapidly disrupts plans.

To ensure they’re thinking strategically about how to stay ahead, companies should ask themselves a number of questions related to demand, resource constraints, technology, and other topics. As mentioned, profit margins are always a key part of income statement analysis, but profit margins in CPGs can be unique. Reach out to us now, and let our teams provide tailored solutions to address your company’s unique needs. Real-time data exchange with partners increases inventory visibility enabling quicker reactions. Centralized distribution centers equipped with automated pick and pack systems help brands scale.

Accounting Manager

We also understand the unique financial accounting and reporting requirements of Consumer Packaged Goods (CPG) companies. Additionally, misclassifying promotions, giveaways, and discounts can inflate revenue figures, leading to inaccurate financial reporting. Properly tagging and categorizing these transactions in accounting software, such as real estate cash flow QuickBooks or Xero, can help address this issue. We help CPG manufacturers optimize inventory management by implementing cost-effective processes, providing guidance on negotiating with suppliers, and identifying opportunities for supply chain consolidation. As you now know, the accounting considerations for CPG companies require careful management. Revenue recognition, inventory management and reserves, COGS, returns, and tax considerations are all important factors that CPG companies must consider.

• CPG companies also cater to the specific needs of children from infancy into their early years.
• You’re not submitting the payroll taxes that you need to be potentially not providing the insurance that you should be if they’re actually employees.
• Thanks to competitors like Dollar Shave Club and Harry’s, Gillette’s share of the US razor market fell from about 70% to under 50% in the course of a decade.
• CPG sales can lead to merchandise returns, customer credits for various reasons, have right-of-return stipulations, and even offer warranty terms to its customers.
• This family-owned business utilizes sustainably produced beef, domestically produced turkey, and grass-fed venison to produce their products.

Sales of packaged goods like bread, milk, bookkeeping for consumer packaged goods companies and toothpaste are less affected by market fluctuations. Consumers may switch to cheaper brands or use their purchases more frugally but they can’t do without them entirely. Durable goods are more vulnerable to economic downswings than packaged goods. Consumers are more likely to delay major purchases in times of economic uncertainty.