Profit Players,
Do you know the #1 telltale sign that a brewery is probably sitting on a mountain of cash in their warehouse? That’s what we’re tackling today.
Welcome back to Back to Basics.
Last week’s response was overwhelming, and I’m loving it. You’re digging it, I’m digging it, and together, we’re working toward more profit.
We’ve already covered Chart of Accounts and Prepaids. Now, let’s talk about Inventory, where a ton of your cash is likely tied up.
We spend tons of cash on raw materials, packaging, merch, food… and we don’t get paid for it until weeks—sometimes months—later. What’s not to love about that? (Kidding.)
The key to keeping that cash flowing?
You know what I’m going to say…inventory management. Here are my suggestions on addressing it.
Use inventory management software. If you’re still using spreadsheets… how? Ekos and Beer30 do a great job of handling inventory, plus a ton more.
Learn how much to keep on hand. My general suggestion? Three weeks of brews. Anything more, and you’re likely dealing with what I call trapped liquidity (aka cash just sitting on a shelf, not working for you).
Do this back-of-the-napkin exercise:
Walk around your storage area, whether that be your cooler, shelves, etc.
Assign a value of 100 to each item (hops, grain, etc) and be sure to include everything you have, no matter if it’s open, half-used, or unused. Note: I understand that each of these items are not costing you $100, but for the purposes of this exercise, I’m baking in opportunity costs. I’m baking in labor. I’m baking in storage. I’m baking in square footage to come up with this one hundred factor.
Multiply that number by 100
The final number? It’s probably bigger than you’d like. Now, sit down with your team and ask:
What are we using in the next three weeks?
What are we not using?
What are we never using?
If it’s not moving, get rid of it—ideally by selling it. If not, clear it out and reset.
That’s your starting point for managing inventory the right way.
As always, drop me a line if you have questions…I’m happy to help.
-cf