How Can CPG Accounting Keep Your Products Flying off the Shelves?

Trade spending that should be recorded against revenue includes anything that reduces the price of the product, such as discounts, rebates, slotting fees, free https://www.bookstime.com/articles/present-value-of-a-single-amount products, deals, and coupons. In the marketing category, you might include demos, advertising, in-store displays, marketing campaigns, and contests. Trade spend is a critical activity for CPG food and beverage brands, but it creates an accounting challenge for many. Promotional activities involve multiple moving parts, and recording each one accurately is essential to properly accounting for profits and losses — not to mention building a better trade-spend strategy. In this guide, we’ll dive into the ways your company can use trade spend analysis to make better financial decisions and improve the health of your P&L. In summary, the CPG industry is a complex and fast-paced environment that demands efficient accounting and procurement processes.

• Although CPG makers generally enjoy healthy margins and robust balance sheets, they must continuously fight for shelf space in stores.
• By staying up to date on the most recent technology, we can provide you with optimal solutions tailored to your business needs.
• In Europe, private label share has risen steadily from 35% in 2020 to 38% in 2024, with frozen and chilled foods holding the highest share.
• Additionally implementing technological solutions such as automation tools can streamline your operations by simplifying repetitive tasks.
• You’ll have multiple partners—each with their own promotions, spend calendars, order volumes, and deductions.
• The problem with this accounting method for CPG companies is that it doesn’t track unpaid invoices, which makes it difficult to get a complete picture of your finances.

The Importance of Streamlining Your CPG Accounting and Procurement Processes

• Customer lifetime value measures the strength of the relationship between a brand and a consumer.
• And it’s not just about loans or investments; you have to keep financial records accurate for tax purposes.
• The brand thought it could revolutionize the beverage market; however, it backfired.
• It’s critical to have a system in place to coordinate the various types of trade spend.
• To thrive in an increasingly challenging environment, CPGs must develop a sharper productivity mindset, withstand the pressure from private labels, and win over value-conscious consumers.

Teams that cannot resolve the invalid deductions problem leave money on the table. By not identifying and recovering the sum lost to invalid deductions, claims become one of the primary causes of revenue leakage. CJBS provides comprehensive financial services tailored to the needs of CPG manufacturers. We offer services https://www.facebook.com/BooksTimeInc/ such as accounting, tax planning, and financial reporting, which streamline operations. Our team can also assist with budgeting, forecasting, and cash flow management, enabling CPG companies to make data-driven decisions and optimize their financial health.

Optimized Cash Flow

• Another important aspect of CPGs is their reliance on branding and marketing to differentiate themselves from competitors.
• They produce goods primarily in the consumer staples category, with streamlined production facilities that can take advantage of economies of scale and lower overall costs of goods sold (COGS).
• The consumer packaged goods industry is highly competitive due to higher barriers to entry as well as high saturation and low consumer switching costs.
• By analyzing supplier performance data regularly, you can determine which suppliers offer the best terms while ensuring quality products.
• It includes the accurate tracking and analysis of inventory, sales and cost of goods sold, forecasting and budgeting, cash flow management, pricing strategy, and other components necessary to maximize profitability.
• That means COGS has already eaten 40% of your revenue; at 2.5x MER, that’s another 40% of your P&L.
• We use this financial term to describe how sensitive a company’s profitability is to changes in revenue.

Firstly, streamlining CPG accounting and procurement processes enables better monitoring of expenses by eliminating duplicate payments or overpayments. It also helps identify potential cost-saving opportunities that were previously overlooked. Additionally, streamlined cpg accounting financial operations allow for easier access to financial data when making strategic decisions. The most advanced CPG companies are doing more than investing in customer relationship management systems to gather and leverage first-party data from their DTC operations. They are also partnering with predictive analytics firms to gauge a consumer’s lifetime value even before that consumer buys a product from the company. The sophistication of these predictive models allows companies like Dollar Shave Club to focus marketing at an individual consumer level to drive the greatest value.

Benefits of Interim Accounting for Middle-Market Organizations

A well-organized COA speeds up bookkeeping and posting of GAAP accrual entries and other adjustments, making month-end reconciliations easier to complete. Real-time automation helps CPAs and managers improve decision-making and assess market trends quickly. Without the right accounting systems in place, even the most popular products can hit a wall, as we have seen in the case of Coca-Cola. When you implement strong accounting practices, your products fly off the shelves and have sustained growth.

Where Are Consumer Packaged Goods Sold?

To thrive in an increasingly challenging environment, CPGs must develop a sharper productivity mindset, withstand the pressure from private labels, and win over value-conscious consumers. Leveraging economies of scale and skill, optimizing product portfolios and exploiting brand value will be the route to sustainable – and profitable – growth. A stable framework is provided by technology to carry out repetitive, manually intensive tasks through automation. However, there is only limited support and capability to leverage the deductions process as a strategic business operation. In addition, formal claims and resolved deductions are easily accessible to the deduction analyst at any point during an audit.