Bookkeeping is a vital part of any business. It keeps your numbers organized, makes tax time more straightforward, and gives you complete visibility of your company's financial health at all times. Unfortunately, bookkeeping can be tedious, taking up significant time and energy. Your expertise should focus more on selecting the right beans or finding the perfect brew, not worrying about numbers and bookkeeping practices. Here are bookkeeping strategies to set the foundation for business growth.
1. Leverage cloud-based accounting software
Choosing cloud-based accounting software for your coffee business will help keep your bookkeeping more accurate. It will also allow you to access all of your financial information at any time from any location.
A cloud-based program like QuickBooks Online can give you benefits such as:
- Data integration: Information from your POS system can easily be synced with your cloud-based accounting software, eliminating the need for manual data entry and ensuring heightened accuracy.
- Daily backups: Cloud-based software automatically backs up all your daily transactions and financial data to ensure that everything is safely saved in the cloud.
- Collaboration with other employees: Because anyone from anywhere can access cloud-based software, it is easy for other employees or accountants to access critical financial data from the cloud.
2. Make sure your POS integrates with your accounting software
A POS system that can easily integrate with your accounting software will make all of your bookkeeping processes much more uncomplicated. You can ensure that your daily sales data flows into your accounting program at the end of each day. This minimizes the need for manual data entry, saving you time and reducing data errors.
Square and TouchBistro are two popular POS software that we often recommend. These two programs have everything you need to help keep your bookkeeping in order and easily sync with your cloud-based accounting software.
3. Set up your chart of accounts properly
Many business owners start their business by using a general chart of accounts. As a result, they are unable to track their finances in a meaningful way. Your chart of accounts should be organized in a way that allows you to gather useful insights into your operations.
As a coffee business owner, tracking revenue as a whole is not as useful because you can’t identify the menu items that are performing best. Instead, you can track revenue in more granular detail by breaking down your revenue into sales categories to see which category is doing best. Similarly, for your expenses, you can set up your accounts to track the cost of sales for food items, drink items, packaging, etc, to understand your gross margins for each category.
You can also create a specific account for sales tax, which allows you to set aside funds throughout the year so you have enough to pay taxes when the time comes.
4. Track your expenses closely
Many businesses make the mistake of not paying enough attention to their expenses. By keeping a close eye on the funds flowing out of your business, you can find different ways to minimize these expenses and even identify costs that can be written off as tax deductions.
5. Simplify your expense management process
Dealing with piles of paper receipts and vendor invoices can be tedious, to say the least. Fortunately, software programs like DextPrepare and HubDoc have come up with a solution to this problem.
These platforms allow you the ability to take photos of your receipts and invoices, after which they are stored in the cloud, eliminating the need for keeping paper copies. Critical data can be automatically pulled from these images and exported to your accounting software. Plus, in the event of an audit, all of your documents are stored in a centralized location, meaning they are easily accessible and readily available for review.
6. Outsource Bookkeeping
One of the best tips we can offer busy coffee businesses is to consider outsourcing bookkeeping. You didn't go into the coffee business to spend time crunching numbers and tracking accounts and expenses. The bookkeeping process can be time-consuming and distract you from more important aspects of your business. Outsourcing can solve this problem, leaving your finances with an expert.
Essential Bookkeeping Strategy Considerations
1. Revenue recognition
The revenue recognition principle says that revenue should be recognized in your financial statements when 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 must track revenue for each channel or 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 clearly grasp how much inventory you have in both the finished product and the work in progress. This will clearly indicate 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 open a cafe where customers can enjoy your products. If you operate more than one location, it is vital to understand the performance of each location individually. It is not useful to have a consolidated view of all locations.
By leveraging class or location tracking functionality on QuickBooks Online, you can achieve financial visibility for each location. This will allow you to generate financial statements for each location, compare their performance and find different ways to improve them.
Final Thoughts
A bookkeeping professional can keep all of your accounts in order, provide you access to the financial reports you need and ensure your books are ready when tax time rolls around. Some might also be able to help you handle your payables and payroll.
As a business owner in the coffee business, bookkeeping is a task that you should not neglect because the financial well-being of your business depends on it. If you are considering outsourcing your bookkeeping process, Enkel is here to help.
The team of bookkeeping experts at Enkel has all the information you need to work smarter and stay organized when managing your bookkeeping. We always stand by, ready to assist and answer your important questions. Contact us today.
