Coffee roasting is a bustling business, as many customers race out each day to coffee shops and grab their daily cup of joe. Several aspects of your business, from advertising and expansion to customer service, demand your attention. Along with all of these priorities come the crucial tasks of bookkeeping and accounting.
Accounting is a vital component of any successful business. By staying up to date on your revenues and expenses, you will always have good visibility of the financial state of your company. You can ensure proper inventory management and control over accounts payable and receivable.
Accounting Considerations for Coffee Roasters
The four most essential accounting considerations for coffee roasting companies are:
1. Revenue recognition
The revenue recognition principle says that revenue should be recognized in your financial statements when it is earned, regardless of when cash is received. This means that revenue is recorded when goods are delivered or services are performed. This means that you have fulfilled your obligations to your customers, and can be paid. Coffee roasting companies generate sales in several ways: online, in stores, wholesale, and more. To get visibility on each channel’s performance, you will need to track revenue for each channel or for when you have delivered product.
One of the best ways to achieve this is to utilize a POS software system that can easily synchronize with your accounting software. Syncing these two systems will help keep all of your different revenue sources organized and save you time from having to track each source.
2. Staying on top of your receivables
As a business owner, it's crucial to remember that a sale is not completed until you receive full payment from your customers. Keeping up to date on your receivables is important for your roastery’s cash flow. It will also ensure that you have sufficient working capital to keep your business healthy and operating.
The three most important aspects of staying on top of your receivables include:
- Invoicing: Be sure that you invoice promptly and accurately. You always want to ensure that you are invoicing the correct person. By using your accounting software to send invoices to your customers, you can save time. You can also automate the invoicing for recurring purchases, making your business even more efficient and helping you receive all of your payments promptly.
- Follow-up: Use your accounting software to send automated reminders to customers about upcoming payments before and after the invoice due date. Automating this process means you save the significant amount of time and effort that would be required to do so manually.
- Payment methods: Ideally, you want to give your customers as many different payment options as possible. Unfortunately, cheques can take some time to clear, and credit card payments may not be feasible for more significant payment amounts. To solve these issues, consider using a platform like Rotessa to automatically withdraw funds from your customer’s bank account, speeding up the process and making it easier for everyone involved.
3. Inventory management
Production is a major part of any coffee roasting business, and you'll want to have a clear grasp of how much inventory you have in both the finished product and the work in progress. This will give you a clear indication of your current overall inventory levels and improve your forecasting abilities when placing upcoming inventory orders. Inventory management is vital for controlling a business' cost.
Many businesses choose to use Excel for their inventory tracking software. While Excel does have its uses, inventory tracking isn’t one of them. Instead, look into more versatile software such as Cropster or Unleashed, which can give you better inventory management and are much more user-friendly.
4. Tracking multiple business locations
As a coffee roaster, you may one day decide to open a cafe where customers can come to enjoy your products. If you operate more than a single location, it is vital to understand the performance of each location individually. It is not useful to have a consolidated view of all locations together.
By leveraging class or location tracking functionality on QuickBooks Online, you will be able to achieve financial visibility for each location. This will give you the ability to generate financial statements for each location, compare their performance and find different ways to improve them.
As a coffee roasting company, keeping these accounting considerations in mind will help you better manage your accounts and, therefore, control your finances. Tracking your revenue channels, staying on top of your receivables, managing your inventory, and separately tracking multiple locations will give you a healthier cash flow and more transparent visibility of your financial health.
If you need bookkeeping support, our team at Enkel can help. We have experience helping coffee roasting businesses across Canada manage their bookkeeping, payroll, and more. For more information on Enkel and the services we can provide, contact us today.
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