You have to handle product creation, inventory purchases, retail negotiations, and much more. It’s no surprise if you put accounting best practices on the back burner while you focus on growing your business. Since there can be high competition, consumer packaged goods companies often compete on price, which can affect margins. If operating margins are extremely low, it can mean companies are overspending on operating expenses, which may not be paying off or could have a longer-term benefit. Lower relative net margins could be another problem if companies are relying on expensive capital for funding. To properly account for returns, a business needs to maintain accurate records of all returns, including the reason for the return, the date, and the value of the returned product.
Consumer packaged goods, or CPG, refers to the space within an industry that features goods that consumers use in everyday life. These goods are produced on a large scale and generally have a short lifespan. Recent consulting news & industry insights from the Bridgepoint digital content & research teams. Deduction support provided by the customer can include overwhelming amounts of product data that must be reconciled against certain promotional events and contracts. Start with your sales reps and brokers, and then contact the customer’s AP department for proper routing directions.
Track the trade spend like a hawk
The increasingly prevalent direct-to-consumer business model requires new capabilities, another driver of supply chain modernization. Explosive demand for omnichannel experiences offering convenience and variety, coupled with unprecedented supply constraints and labor volatility have added complexity to how CPG cpg accounting companies serve both retail customers and ultimate consumers. Consumer packaged goods companies have faced daunting challenges in recent years to sustain consistently strong performance. Over the last several decades, the sector has swung between periods of M&A-driven growth and cost-cutting margin expansion.
Effective procurement processes are equally critical as they ensure that your company has access to the materials needed for production at the right time and cost. By analyzing supplier performance data regularly, you can determine which suppliers offer the best terms while ensuring quality products. We understand the power of key accounting principles in maintaining accurate records, tracking every penny, and analyzing your financial health. By partnering with us for your CPG accounting needs, you gain invaluable insights into your financial health and can identify opportunities for growth and improvement. When investing in companies in the consumer packaged goods sector, it is best to evaluate key points of the company’s financial data for information about accounts receivable and inventory turnover. For example, a sales change affects accounts receivable and cash flow performance.
What Are Examples of Consumer Packaged Goods?
These shifts will help industry leaders unlock growth with brands and business models, old and new. Consumer markets companies choosing to re-evaluate core business strategies related to supply chains, ESG initiatives and operating models in the context of an evolving tax and business landscape will be best positioned for future success. Using a data-driven approach — supported by technology — they can harness the insights necessary to make sound decisions, despite uncertainty and complexity.
Many of the shopping habits and expectations from the pandemic have persisted. People might be going out to shop again, but many have found that they like online shopping, delivery services and curbside pickup. Businesses need to account for these changes when performing CPG data analysis. Until recently, the pandemic was the most notable factor shaping consumer behavior around CPGs.
Bottom line: Understanding FMCG and CPG is key
Companies with high operating leverage tend to do better in bull markets and periods of high growth, as profits grow faster than revenue. Still, because of the fixated nature of the cost structure, they tend to get wiped out much quicker in economic downturns. CPG companies must assess the likelihood of inventory becoming obsolete and create inventory reserves to account for potential losses.
