Primary Blog/Use Case/Tracking Payroll and Operations Expenses

Tracking Payroll and Operations Expenses

Easy and Effective Expense Tracking Using Modern Analytics

One of the crucial components of brewery finance is understanding and tracking payroll and operations expenses. This ensures not only profitability but also the longevity and success of the business. In this blog, we'll dive deep into why tracking these expenses is essential and how a modern analytics system can give you the insights that you can’t get through spreadsheets alone.

Keeping Tabs on the Bottom Line
At its core, a craft brewery is a business. And like any business, profitability is essential. By diligently tracking payroll (your employees' salaries, benefits, etc.) and operations expenses (raw materials, utilities, equipment maintenance, etc.), you can gauge your overall financial health. If either of these costs starts rising disproportionately, it can squeeze profits and signal potential issues. However, while important to watch diligently, it can be difficult (and painful) to get to the insights needed to drive smart actions.

Comparing Current Expenses to Prior Periods

By comparing expenses from one period (say, this month) to a prior period (like last month or the same month last year), breweries can identify patterns. Maybe you're spending more during a specific season, or perhaps there's a slow, gradual rise in certain costs. Such comparisons can help forecast future expenses and guide budgeting decisions. Moreover, they can provide insights into the effectiveness of any operational improvements or changes made over time.

This dashboard example allows the user to choose what timeframes they want to compare which can be very helpful in getting to actionable insights quickly. In this example, we’re comparing Jan-Jun this year vs last year.

Relating Expenses to Sales Volume
Comparing your expenses against your total sales volume is a way of measuring efficiency. If, for instance, your sales volume is increasing but your operational expenses are holding steady or even decreasing, it suggests that you're becoming more efficient. On the other hand, if sales volume dips but expenses remain high, it's a clear signal to reassess your strategy and look for areas of improvement.

In this example, we can see that recent payroll as a % of sales has been increasing from a previous low period, that’s probably something we should dive into more. On the other hand, even though total rent expense has gone up slightly, when expressed as a % of sales it is trending lower.

Granularity Matters: High-level vs. Low-level Review
It's essential to view expenses at both a macro (high-level) and micro (low-level) perspective.

High-level Review: This gives you a bird's-eye view of where your money is going. It can quickly show if one category, like payroll, is consuming a disproportionate chunk of your revenue.

Low-level Review: This dives into the nitty-gritty, helping identify specific areas of concern or opportunity. For instance, if utility costs are high, a detailed review might show that a particular piece of equipment is draining more power than it should, signaling that it's time for a repair or replacement.

In this example, we can quickly get to the individual vendors that make up a certain expense category. In this case, which is a deeper dive into Wholesale Cogs, we can quickly see that Custom Label vendor has increased the most over the prior period and is recently up as a % of sales too.

Making Informed Decisions
When you have a clear understanding of your payroll and operations expenses and how they relate to sales and past periods, you're in a better position to make informed decisions. With modern analytics you can get to the insights you need to make an informed decision on hiring new staff, investing in new equipment, or adjusting prices. Having the data to back your choices can make all the difference.

Conclusion
Craft brewing is as much an art as it is a science. While the creative side involves brewing unique and delightful beers, the science side requires diligent financial tracking and analysis. By keeping a close eye on payroll and operations expenses and contextualizing them against past data and sales volume, breweries can ensure they remain profitable, efficient, and poised for growth. So, here's to smart financial tracking in a modern analytics system – the unsung ingredient in your brewery's success story!

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