Although categorizing transactions is essential in all businesses, it’s even more vital for CPG brands. CPG companies can’t run effective operations without insight into their cash flow. Without knowing where your cash is coming from, where it’s going, and how much you have on hand at any given moment is essential for understanding other important metrics of your business, including the profitability of your products.
Make leadership responsible for communicating the importance of teamwork between sales, accounting and finance when calculating accruals and managing deductions. Following the ins and outs of these deductions is time-consuming and costly. Engage your broker in helping manage this process and hold customers accountable. Recognizing and planning for the complexities of trade spend and revenue deductions are necessary first steps in establishing processes to manage this critical area of the business. We use this financial term to describe how sensitive a company’s profitability is to changes in revenue.
Lowe’s Marketplace Integration
The small brand proposition is usually the “sparkle”—often predicated on new, niche consumer insights or a business model that big brands typically lack the authenticity to offer. The scaling risk lies in expanding beyond the core too early, before a small brand has earned the right to offer the adjacency. CPG players need to rethink their portfolio priorities and “where to play” choices to increase their exposure to growing markets, channels, and subcategories.
Today, Propeller’s 350+ full-time professionals on three continents are proud to be considered the premier finance and accounting partner to many of the most iconic emerging companies in every category we specialize in. One of the most important ways a CPG manufacturing business can optimize their sales of both CPG and FMCG products is by using retail analytics. If you don’t know what products are selling fastest and in what markets, you risk falling behind. If you know one of your products is selling faster than others, you can invest strategically to increase sales velocity and gain more distribution. Keeping a tight rein on your trade costs helps you create and allocate budgets based on hard, cold data — and the actuals from accounting — and update your forecasts and budgets to reflect the most accurate and up-to-date information.
Bridge the Gaps Between Sales, Accounting and Finance
Starbucks leaders understood the value of retaining customers across every stage of life. The shift from traditional product- and brand-centricity to consumer-centric business models had seemed almost insurmountable for consumer packaged goods (CPG) companies cpg accounting — until a global pandemic resulted in explosive growth. Consumer adoption of grocery e-commerce exceeded 103% YOY in 2020 and continued expanding in 2021 with 7.2% YOY growth. For example, a sales change affects accounts receivable and cash flow performance.
After a period of disruption intensified by the COVID-19 crisis, the CPG industry is entering a new era. CPGs that prosper in the 2020s will make “where to play” choices that strengthen their portfolios and get their categories and brands on the right side of the disruptive trends. These shifts will help industry leaders unlock growth with brands and business models, old and new.
Inventory Storage
The consumer packaged goods industry is highly competitive due to higher barriers to entry as well as high saturation and low consumer switching costs. As you now know, the accounting considerations for CPG companies require careful management. Revenue recognition, inventory management and reserves, COGS, returns, and tax considerations are all important factors that CPG companies must consider. By carefully managing these factors, CPG companies can maintain profitability and succeed in a highly competitive market. We advocate establishing a high-profile, institutionalized sprint process that identifies, resources, and sponsors new capability-building and other priorities across the business in short-burst cycles. One CPG company, for example, identified mission-critical tasks in marketing and organized cross-functional teams in six-week sprints around each task.
- Digital media and the ubiquity of digital data are transforming how consumers learn about brands.
- For consumers and their avatars in the metaverse, the value exchange included the limited-edition product, a virtual metaverse concert and partnerships with streetwear designers.
- The piece of the puzzle that makes these an area for further review is timing.
- This may occur due to changing consumer preferences or market trends or when a product is approaching its expiration date.
- These are simple steps and can be started with little effort, and the results can be dramatic even in a short time.
- Channel strategies will need to be even more customized to each country and category trend.
This may help you better understand the nuances of navigating the retail industry. In the world of retail, you’re used to hearing and using the terms CPG and FMCG interchangeably. And for the most part, you’ll do fine spending a whole career using these two words that way.
Granular growth, globally
We also highly recommend you reach out to our team, so we can help you build a customized paid plan with Byzzer. You can have sales data and much more available for any need that may come up. When you have to pull information from multiple data sources — and then have a lot of people touching that data — it can lead to mistakes, inconsistencies, and inaccuracies, which in turn leads to poor decision-making. One step further, consider reporting financials that are GAAP (Generally Accepted Accounting Principles) compliant. While not required for certain types of companies, standardizing the reporting merely allows for credibility within your organization. Activists ran more than 110 campaigns per year against CPG players in 2016–19, increasing attention to SG&A industry-wide.