Beyond profit margins, activity ratios can also be important in the consumer packaged goods industry. This leads to a high level of importance on accounts receivable management as well as inventory management. As mentioned, profit margins are always a key part of income statement analysis, but profit margins in CPGs can be unique. This is because many CPG companies have developed streamlined production facilities with the advantage of economies of scale to lower the overall cost of goods sold and create a higher gross profit margin. Your team, from leadership to sales to finance and accounting, needs a deep understanding of the process and the importance of each step to enable proper, accurate treatment. The real value lies in the ability to forecast each activity and understand spend to guide proper accruals that lead to accurate financials.
Accrual accounting gives you a broader picture of your real-time finances and allows you to make better decisions about sales tactics and market trends. Accrual accounting makes it easier to analyze your finances period to period and understand your cost of goods sold. By assessing market trends, consumer behavior, and historical data, we help brands anticipate future challenges and opportunities. Our focus on CPG-specific budgeting and forecasting ensures that brands can make proactive financial decisions to drive growth and achieve their goals. CPG brands face unique financial challenges, from managing costs and setting budgets to accurately forecasting and reporting on their performance. Efficiently handling these financial complexities is essential for staying on track, making informed decisions, and ensuring long-term profitability.
Examples for Leveraging Trade Spend
At large retailers, teams that support physical and digital channels continue to integrate with the goal of providing consumers with a seamless omnichannel experience. CPG companies will need to do the same; leading companies are already making progress. That’s where our team at Expertise Accelerated comes in – we can help you streamline your accounting processes, ensure compliance with industry regulations, and provide valuable insights into your financial performance. Based on those deals, you will see deductions occur from accounts receivable payments, sometimes without authorization.
At emerge, we provide comprehensive financial management solutions for CPG brands. Our team of experts understands the industry dynamics and works closely with brands to develop customized financial strategies. From budgeting and forecasting to cost control and financial analysis, we help brands optimize their financial resources, enhance profitability, and drive growth. In summary, the CPG industry is a complex and fast-paced environment that demands efficient accounting and procurement processes.
Key Accounting Considerations for Consumer Packaged Goods (CPG) Companies
This activity can be extremely time-consuming and may include filtering hundreds of line items to extract meaningful financial intelligence for sales and finance teams. The validation process ensures that all deductions are legitimately based on agreed-upon trade deals and terms with customers. But for this process to work, you need to make sure everyone in your organization is playing their part. To help build cpg accounting appropriate insight on spending expectations, create a framework of trade deals, promotional calendars and forecasting models, and share it across the organization. Make leadership responsible for communicating the importance of teamwork between sales, accounting and finance when calculating accruals and managing deductions. Engage your broker in helping manage this process and hold customers accountable.