Reading brewery and taproom bookkeeping with a sceptical eye

What to take away

Why the money moves before the beer does

Two clocks run in a brewery with a taproom, and they do not agree.

Payroll is the first. Every employee must be paid on a fixed cycle whether the room was full or empty. Beer is the second clock. Malt becomes a sellable pint over weeks of fermentation, conditioning and packaging.

Money leaves on the payroll clock and returns on the fermentation clock. Most cash squeezes in this trade come from the gap between the two, and that gap is what the rest of this article is about.

A chart of accounts that answers questions

Set it up so that the questions you will actually ask can be answered without re coding anything later.

That last one changes behavior. Loss buried inside cost of goods is invisible. Loss on its own line gets discussed.

A starting chart, using four digit codes, looks like this. The codes are a sample, not a standard.

Labor splits are worth defending against the urge to simplify, because production and taproom hours answer different questions. Tipped and non tipped hours are compensated and scheduled differently.

That same distinction governs hiring and training the crew, and accounts that reflect it let you see a staffing problem in the numbers before you see it in the schedule.

Keep the account names aligned with how your systems name things, so the exports described in the measures and the monthly reconciliation can feed the books without retyping.

The two cycles that do not line up

Payroll runs on a calendar. Beer runs on biology.

Work out your own version of this: count the weeks between paying for an ingredient and selling the beer it became. Count the days between working a shift and paying for it. The first is usually measured in weeks and the second in days.

Every dollar of growth widens the first number, so a busy period can leave you short of cash rather than flush with it.

The practical consequence is that raw material purchases and payroll should be planned together rather than by separate people. A large ingredient order landing in the same week as a payroll run and a quarterly obligation is the classic avoidable squeeze.

The thirteen week cash view

This is the single most useful bookkeeping habit available to a small operation, and it takes about twenty minutes a week.

The value is in step five. After two months you will know how wrong your forecasts run and in which direction, and that correction factor is more useful than any budget.

Anything that lands in a single week and is large deserves its own line: an equipment payment, an insurance renewal, a packaging run, a tax deadline. Those are what turn a comfortable position into an uncomfortable one.

Illustrative figures for a small taproom brewery, rounded. They are an example, not a benchmark.

The balance starts at 14,000 dollars in week one. Week four is where three outflows meet an ordinary week of deposits, and the account drops by more than half.

Week five is the real warning. Payroll of 9,500 dollars is due, and only about 6,000 dollars of deposits are expected first.

The forecast shows it four weeks ahead, which is long enough to push the malt order back a week or draw on a line of credit. The same numbers kept in your head say nothing until the account is short.

Records, and keeping only one version of the truth

The Internal Revenue Service: What kind of records should I keep? guidance lets a business pick its own recordkeeping system. It must clearly show income and expenses, and the supporting documents must survive.

In this trade, that rule has a specific consequence. The count sheet, packaging log, sales export, and books all describe the same beer. They should reconcile.

Set aside one hour a month to check that they do, and write down the unexplained remainder every time. Do not chase a single month's variance. Watch the trend over a year, because a consistent variance points at a process and a random one usually points at counting.

Your production and removal records serve a second purpose: federal obligations attach to beer produced and removed. Keep them in one form that supports both uses instead of two sets.

For a US brewery the named records are concrete. TTB Form 5130.10 is the Brewer's Notice, and TTB Form 5130.9 is the Brewer's Report of Operations, filed monthly.

Behind those sit your daily brewing records, records of beer removed, records of beer returned, and your tax determinations. TTB asks brewers to keep those records for at least three years.

The IRS generally asks for three years of records, and four years if income is understated by more than 25 percent. Employment tax records run for four years after the tax is due or paid, whichever is later.

The wider set of records a licensee must keep, and for how long, is part of what your license actually requires of you. Retention periods differ by body, so ask each one.

The four controls that matter most

Your accounting system holds payment data, payroll data and your entire financial history. Four controls carry most benefit.

The National Institute of Standards and Technology: NIST Small Business Quick-Start Guides sets out the basics in steps a business can complete without dedicated staff.

The Cybersecurity and Infrastructure Security Agency: Cyber Guidance for Small Businesses covers fraud patterns that hit small operations. These include payment redirection and account takeover.

They are individual logins instead of a shared account, multi factor authentication on banking and payroll, a second person who reviews payment changes, and a backup you restored from once.

Separating the two businesses in the reports

Produce a monthly view with production and taproom side by side rather than combined. It is uncomfortable at first, because one of them usually looks much better than the other, and that is the point.

The taproom typically shows strong revenue per unit and heavy labor, while production shows the reverse. Combined, they average into a number that tells you nothing about which to invest in.

Separated, the answer to most questions appears, including whether the next step is one of the routes to more volume or a change to how the room is staffed.

Charge the taproom an internal transfer cost for the beer it sells, set at what that beer cost to make. Otherwise production looks like a pure cost center, and every decision about it will be wrong.

Set that price by taking the batch cost of ingredients and packaging, adding the production labor hours and production utilities the batch consumed, then dividing by the number of sellable units.

For example, a 15 barrel batch that costs 3,000 dollars to make and yields 30 half barrel kegs carries a transfer price of 100 dollars a keg. Recalculate it when malt, cans or production wage rates move.

Ask your accountant how that convention should appear in the statutory accounts. The internal view and the filed one need not be identical.

What to hand to a professional

Entity structure, payroll setup, tipped compensation treatment, excise obligations, and first-year filings all matter. Outsource payroll early: the cost is modest, the penalties for errors are not.

Confirm wage and hour treatment with your state labor department. State tipped-pay rules often differ from federal ones, and the stricter rule applies.

Common questions

Cash or accrual?

Ask your accountant, because the answer depends on your size, structure and inventory position. What matters more day to day is that you keep the thirteen week cash view regardless of which basis the accounts use, since profitability and solvency are different questions.

How often should the books be reconciled?

Bank reconciliation monthly at minimum. The inventory to sales reconciliation monthly as well. Payroll every run, because errors compound and are painful to unwind.

Should tips run through the books?

However your payroll provider and your state require, and that is a question to settle before the first payroll rather than after. Get the answer in writing from your state labor department and give it to whoever runs payroll.

What is the most common bookkeeping mistake in this trade?

Treating all labor as one line. It hides which half of the business the money is going into, and it makes every staffing decision guesswork. Split it on day one, and split tipped from non tipped while you are there.

Do I need brewery specific accounting software?

Not at first. You need a chart of accounts that separates the two businesses and a way to get sales, hours and production into it without retyping. That is a design decision more than a product decision.