Navigating the complex world of CPG regulations is another area where a specialized accountant can save you headaches — and money. From FDA labeling requirements for ingredient disclosures and health claims to food safety regulations like the Food Safety Modernization Act, CPG businesses face strict compliance rules. Even California’s Proposition 65, which mandates warning labels for products containing certain chemicals, can catch brands off guard, leading to costly fines if not properly handled. Perhaps you want to adopt more eco-friendly packaging and shipping methods — but these often come with higher price tags. On the one hand, consumers demand sustainable products, and you want to Retail Accounting offer them. Finding that balance between sustainability and profitability is something every CPG founder needs to grapple with.

• For early-stage brands, you might be able to handle basic bookkeeping yourself, but as you grow, you’ll likely need the help of a CPA or accounting firm that specializes in CPG.
• CPG accounting isn’t just about crunching numbers; it’s the engine that keeps your business going.
• Inventory reserves are used to account for potential losses on inventory and are recorded as a contra asset account on the balance sheet.
• Let’s use gyms and fitness centers during COVID-19 as an example — a business model with a high degree of operating leverage.
• But these concepts aren’t just industry jargon—they’re the foundation for making profitable decisions that lead to sustainable growth.

CPG Accounting Industry Pitfalls

Inventory constantly moves in the CPG sector, so any error in stock count can lead to incorrect financial statements that skew your understanding of product performance. Inaccurate tracking often stems from manual processes that are prone to human error. Partnering with an experienced accounting firm helps inventory-based businesses manage tariffs, track true product costs, and protect profitability. Effective inventory management is critical for CPG businesses due to the perishable nature of many products. Unfortunately, many business owners struggle to keep track of their stock levels accurately. cpg accounting Failing to update the value of each SKU and not employing dedicated inventory management solutions can lead to inefficiencies and unnecessary costs.

• Using this approach, COGS includes product costs and the variable costs incurred for fulfillment and operations.
• If you want to take the guesswork out of your CPG business, partnering with Tangent Consulting can save you the headache of running a business.
• Her extensive industry knowledge and empathetic approach drive sustainable growth and success for the businesses she supports.
• I’d help you develop a cash flow forecasting model that aligns your production schedule with expected receivables, making sure you’re in a strong financial position throughout the process.
• It will inhibit you from identifying operating leverage in the business (discussed below).

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

Automated tools, meanwhile, provide real-time visibility into your inventory levels. This eliminates guesswork and guarantees you have the right amount of stock on hand to meet customer demand, which prevents lost sales opportunities and overstocking issues. Take time to learn the ins and outs QuickBooks of every category of FBA fees and how they apply to your products. You need to familiarize yourself with the different types of charges, including fulfillment, storage, disposal, and returns.

Mind the cash flow

Financial statements are the foundation of informed decision-making, tax filing, and building trust with investors and stakeholders. Reconciliation ensures the accuracy of those records, providing you with reliable data you can depend on. It also demonstrates your commitment to financial transparency and responsible business practices. Automated tools can also handle the complex task of inventory valuation to verify the accuracy of your financial statements.

Our experts help minimize tax liabilities through effective planning, assist with audits, and manage all necessary documentation to avoid potential penalties. Having a team of experienced professionals with expertise in the various areas of accounting and finance can help give you more immediate visibility on the financial health of your business. Our team stays up to date on the latest regulations and best practices which can be a challenge for small businesses to do on their own. CPG accounting isn’t just about crunching numbers; it’s the engine that keeps your business going.