What Can the Four Main Ingredients of Beer Teach You About Your Brewery’s Accounting?

Jeremy Kern

A renaissance is occurring in the brewing industry — consumers’ tastes are shifting away from the products of the leading beer manufacturers and toward small craft brewers. The craft beers have distinct tastes and are quickly gaining a larger piece of the overall beer market. The industry is growing at such a rapid rate that many are considering jumping in on the action. The question is, then, what should someone looking to start a new operation consider before finishing their pint and making the next one themselves? 

The four main ingredients in beer are grain, hops, yeast and water. Each of these is relatable to a functional part of accounting that is important if you ever decide to scale up and brew for the world or even your local watering hole.

Grain – Grain is combined with hot water and is transformed into a brew-ready malt. This combination causes the grain to create enzymes that transform proteins and starches into fermentable sugars for the yeast to feed on and create alcohol. Much like the transformation of the grain, your accounting transformation begins with numbers in your head, then eventually materializing in an advanced accounting software.

An accounting software will help you track your receivables, sales, expenses and whatever else you need to create your next batch. As the business grows, you can add on third party apps that help with the brewing process. These apps are synced with your accounting software to take your efficiency to the next level. This hands-off accounting process will leave you more time for quality control!

The options available for accounting software are endless, but the key is having one. Yeo & Yeo’s Computer Accounting Solutions Group regularly evaluates accounting software and third party apps to align the correct option to the needs of our clients and create custom reports. The process of selection and implementation is simple when you are working with a professional who understands your unique needs.

Hops – Hops are used primarily as a flavoring and stability agent in beer which can create bitter, zesty, or citric flavors. In addition, hops are a preservative and extend the life of beer. When it comes to accounting, an immediate need that affects your stability is knowing when to file the proper paperwork.

Tax planning today can impact the success of tomorrow. Part of tax planning is having a professional who knows which forms need to be filed and when. The professionals will also open your eyes to available tax credits and help minimize tax burdens over the life of the business.

Now when it comes to stability and filing paperwork on time, your tax returns for local, state, and federal governments are just the beginning for a brewery. You will encounter requested forms from banks and the liquor control commission. Working with an accountant who understands your needs and maintains a close working relationship with your attorneys and bankers will be key in keeping your business running smoothly.

Yeast – This feeds on the fermentable sugars mentioned above which creates alcohol and carbon dioxide. It creates the finishing touch and many brewers consider this their secret ingredient. Yeast has cell-splitting capabilities, but the $5 bill in my hand does not unless it is used to create $10 worth of beer. Make your investment multiply just like the yeast by creating a profitable operation and understanding items such as break-evens and cash flows.

Water – This component can account for up to 95% of beer’s content and affects the pH, seasoning from the sulfate to chloride ratio, and can cause off flavors from chlorine to contaminants. So what is the most important part of accounting for a new brewery? Actually doing all three of the previously mentioned items, of course. If you complete only one or some of these foundations for beer, your next batch probably won’t be a big hit since it will not be beer. The same goes for the accounting since without doing the items above, your business will not be a desired brew and likely be dumped down the drain.

You may be able to get by for a short period of time without doing these items, but sooner or later your hops will run out. So as you craft your next recipe that includes the four main ingredients of beer, make sure your plans for your new brewery include the four main ingredients of accounting so we can all enjoy your creations for years to come. And for the love of beer if you have accounting questions, or need help, call me so the rest of us are able to enjoy your next concoction!

 

Jeremy Kern

Jeremy Kern

CPA

Jeremy Kern, CPA, provides business consulting services, and tax planning and preparation services for Yeo & Yeo’s individual and business clients, with a focus on construction, breweries, estates and trusts. He is a member of the firm’s Construction Services Group. He is a Senior Accountant and serves in the firm’s Midland office. Contact Jeremy via email at jerker@yeoandyeo.com or call 989.631.6060.