Challenge: A rapidly growing brewery had limited to no internal accounting function. The financial information they did have was not reliable, profit margins were unknown, and there was no inventory system in place. A custom margin analysis was necessary for the brewery to grow and scale their business.
Signature Analytics’ Solution:
Calculated COGS for each product line. We started by determining the true cost of goods sold (COGS) for every product, calculating the total cost to brew and package each type of brew (Amber, Blonde, Hefeweizen, etc.) and size (case of 12 oz. bottles, 15.5 gallon kegs, etc.) sold. The COGS incorporated all the raw material costs (grains, hops, yeast, etc.), as well as personnel and packaging costs.
Determined employee utilization rates. Comparing the total cost of each employee to the hours worked that were actually billable to the company’s clients (i.e., revenue generated), allowed us to determine the profitability of each employee. Using this information, the company was able to easily identify employees that were under-utilized, or not profitable.
ROI: Recovered $120,000 Excess Tax Payment
The company was able to file an amended return to recover the amount they had over-paid; however, the company had been in a tight cash flow position and therefore this excess tax payment hurt the operational decisions made by the company. Furthermore, had they not requested that we perform a detailed review of the financial information they may have never known there were errors in their system and the statute of limitations on filing an amended return may have expired.
Best Practices for Avoiding Inaccurate Tax Payments
- Accuracy, accuracy, accuracy
- It is important to reconcile your accounts on monthly basis.
- The accounting team should maintain consistent communication with tax preparers.
- Ensure a detailed review of year-end financial statements prior to providing to tax preparers.