Are You Using the Right KPIs for Your Brewery?

Are You Using the Right KPIs for Your Brewery?

How do you know if your brewery is performing well, where there may be opportunities for improvement or fixes required, and whether it’s positioned to survive these financially uncertain times? Tracking the right Key Performance Indicators or KPIs can help keep growth and performance on track.

Perhaps one of the biggest challenges is deciding which KPIs will prove most valuable to your business.  There are KPIs that can apply to all businesses and industries; to the food and beverage industry; to specific brewing processes like fermentation; and to breweries in general.

Selecting KPIs that give you insights into big picture performance as a business along with KPIs specific to breweries may provide you the most valuable insights to help you track progress, analyze performance, and make decisions in today’s uncertain economic environment.

Financial KPIs to consider:

  • Cash flow reveals how much cash your business generates and how much money is flowing through your business. It’s calculated by subtracting cash outflow (i.e., taxes, rent, supplier payments, etc.) from cash inflow from customer payments.
  • EBITDA per unit measures profitability over longer periods of time like a month, quarter, or year (rather than a day or week). EBITDA stands for earnings before interest, taxes, depreciation, and amortization. In addition to cost of goods sold (COGS), which reflects the cost of raw materials and packaging, it accounts for all operating expenses (i.e., rent, marketing, salary, benefits, etc.).
  • Gross margin per unit helps measure profitability by determining the percentage margin of a single unit after subtracting total COGS.
  • Break-even point gives insight to profitability, by helping you understand the minimum number of units you need to sell in a time period to be profitable.
  • Days inventory reveals the number of days inventory is in stock before it is transformed and sold as a finished product, which provides insight into your working capital. A significant decrease may point to pending cash flow issues.

Production KPIs to consider:

  • Utilization rate is your brewery’s total production capacity measured as a percentage. When it decreases, production system issues or low orders may be to blame. It can also inform your decisions about scaling production.
  • Cycle time is the average amount of time it takes to produce your product, from start until it is shipped. This KPI gives insight into how efficiently your machines are operating by showing how many days it takes to produce your product from start to finish.
  • Throughput is the average number of units produced within a defined time period (i.e., day, week, month, etc.). This KPI gives insight into your production line’s efficiency. When it decreases, evaluate why and make needed adjustments.

Sales KPIs to consider:

  • Average order value reveals how much each customer typically spends per order, which helps with sales projections, production plans and run rate. If you notice this KPI decreasing, evaluate whether there are improvement opportunities within your sales process.
  • Fill rate measures how quickly total orders are filled and reach a customer’s destination. It provides insight into working capital efficiency and customer satisfaction, while also helping to identify the need for improvements.

For more insights, contact RBT CPAs’ advisory services team. As always, we’re also here to partner on all your tax, audit, and accounting needs so you’re freed up to focus on your business success. Give us a call today.

How Drones Are Changing Construction

How Drones Are Changing Construction

What’s keeping you up at night?

If you’re like most construction company owners, the following are probably somewhere on your list: labor shortage, financial environment, procurement and the supply chain, project progress, worker safety, managing cash flow and costs, and more. Have you ever considered that drones – yes, drones – may help address your biggest concerns?

Drones can do a lot for your construction business.

The growth of their use is skyrocketing. They save time and money; keep projects on track; get certain jobs done faster; increase productivity; decrease on-the-job injuries; promote security of work sites, supplies and equipment; identify issues and course correct opportunities quickly; free up talent to focus on other tasks; possibly provide a competitive and service advantage; and more.

How?

Drone photos, videos and other images help scope out projects, track progress and provide real-time updates that can be viewed remotely. More specifically, drones are used to:

  • Map, survey and project plan According to com, “Drones survey vast acres of land in just 15 to 30 minutes, saving up to 20x the cost of creating topographic maps” and “Teams can use drone software to stitch maps into 3D models for analysis and project planning.” Ultimately, they can help with feasibility, design, course corrections, and project timelines, and budgets.
  • Manage projects and clients Is the project progressing according to plan? Have you identified issues that can be rectified to stay on track? Are designers, engineers, and construction staff able to access data in real-time to collaborate and problem-solve? Will providing images of progress offer additional peace of mind to clients, especially if they’re at a remote location?
  • Monitor supplies How much gravel is left? What about lumber? A drone can help you get images to keep track and order accordingly.
  • Manage equipment Where is the equipment? Is it operating effectively and, if not, what’s going wrong? Is it secure and protected from potential theft? Are you done with it/should it be returned to avoid additional charges? Drones can get you the answers in real-time.
  • Promote safety Drones help capture measurements and images in high and hard to reach places in lieu of risking worker falls and other injuries. They can also help identify and fix potential risks – like loose or unstable equipment.
  • Conduct inspections View and analyze images without the safety risks. Heat leaks, cold spots, and electrical images can be identified with thermal sensors.

As noted on ForConstructionPros.com, “Think of a modern drone as a flying rack onto which you can attach or swap the latest technologies — multispectral sensors, high-definition cameras, and machine learning software capable of creating 3D maps from topographical data, able to be captured from virtually anywhere…By using drones and sophisticated software, planners can combine, match, and overlay their own data vis-a-vis terrain and property lines. Third-party software can then do much of the grunt work, taking advantage of existing data and resources, utilizing these most efficiently while avoiding pitfalls.”

Interested in learning more about how drones can help your construction business, not to mention help you get a better night’s sleep? Check out these resources:

If you’re interested in learning how to account for drone training, licensing, and equipment, give RBT CPAs a call. We’re a leading accounting, tax, and audit firm in the Hudson Valley and beyond, and believe we succeed when we help you succeed. Give us a call today.

If you’re interested in learning how to get a drone program off the ground in 2023, watch for our next thought leadership article coming in January.

Examining 179D Deductions through the Eyes of the IRS

Examining 179D Deductions through the Eyes of the IRS

If you are looking to take a 179D Deduction as the official designer of a government-owned property or a commercial property owner, take note! Recently, the IRS Large Business and International (LB&I) Division released an updated its training with guidelines for IRS staff to perform examinations for 179D deductions. While this serves as a job aid for IRS staff, it also provides important insights to architects, engineers, and contractors looking to take advantage of 179D deductions.

179D tax deductions took effect in January of 2006 and became permanent as part of the Consolidated Appropriations Act of 2021 (signed into law December 27, 2020). Basically, 179D deductions enable eligible building owners to claim a tax deduction for installing qualifying systems that reduce energy and power costs by 50% or more. Qualifying systems include interior lighting; building envelope; heating, cooling, ventilation, or hot water systems.

This year, the deduction can equal up to $1.88 a square foot. So, if the qualified building is 100,000 square feet, that could mean up to a $188,000 tax deduction for the work completed.

Commercial building owners and designers of government-owned buildings are eligible for 179D tax deductions; however, the updated IRS training places more emphasis on what to watch for during government-owned building examinations.

Since government buildings are non-taxable, government building owners can allocate 179D tax deductions to the building designer, namely the person who created the technical specifications for a new building or an energy-efficient commercial building property addition. This may include an architect, engineer, contractor, environmental consultant, or energy services provider; it does not include a person who installs, repairs, or maintains a system. However, it is the IRS examination – not the building owner – that determines whether a taxpayer meets the definition of designer.

An allocation letter from a government building owner alone is not enough to establish a taxpayer as a designer eligible for the 179D deduction. Examiners determine eligibility by reviewing who contracts designate as responsible for design. To establish designer status, a designer must provide the contract along with technical specifications, stamped or sealed drawings, and any other relevant documentation.

Government building owners that do provide an allocation letter may be interviewed by agents to ensure they have the authority to make the allocation. Also, to claim the deduction, certification by properly licensed individuals is required.

IRS examiners are encouraged to determine the Designer of Record by reviewing stamped or sealed drawings; however, this excludes shop drawings used to make sure a building conforms to an architect’s or engineer’s design requirements. Technical specifications created by the architects and engineers take precedence over shop drawings, increasing the likelihood that architects and engineers will qualify as project designer(s). While not explicitly addressed in the IRS training, it seems likely that contractors engaged to provide both design and construction services can also meet designer status requirements.

In addition to these efforts to clarify who is considered an eligible designer, the IRS training emphasizes tax-exempt and non-profit organizations cannot allocate 179D deductions to designers. For example, a state university that places some buildings under a private foundation cannot allocate 179D deductions.

The examination’s final step focuses on whether penalties for taxpayers are warranted based on adjustments. If an adjustment results in underpayment or an excessive refund or credit, agents will consider accuracy-related penalties (i.e., for negligence or substantial underpayment or an erroneous claim for refund).

For 2023, the Inflation Reduction Act significantly increases certain reimbursements and enhances flexibility to take advantage of 179D deductions. Watch for more information in the weeks ahead. In the meantime, if you need help understanding, securing, and certifying 179D deductions, RBT CPAs – a leading accounting firm in the Hudson Valley and beyond – can help. Visit rbtcpas.com or contact the office closest to you:

  • Hudson 518-828-4616
  • Lake Katrine 845-336-7183
  • Newburgh 845-205-7482; 845-567-9228
  • Poughkeepsie 845-262-4338; 845-485-5547
  • Wurtsboro 845-260-6138; 845-888-2789

(Source: Aberin, CJ. “IRS updates guidance on tax deductions for energy efficient buildings.” AccountingToday, July 15, 2022, https://www.accountingtoday.com/opinion/irs-updates-guidance-on-179d-tax-deduction-for-energy-efficient-commercial-buildings.)

New York State Unemployment Interest Assessment Surcharge: What Businesses Need to Know

New York State Unemployment Interest Assessment Surcharge: What Businesses Need to Know

Starting this month, don’t be surprised if you receive a bill for an Interest Assessment Surcharge (IAS) from the government. It’s for interest New York State owes the federal government on loans it took out to maintain unemployment and pandemic benefits between March 2020 and September 2021 for COVID-related programs.

New York’s Unemployment Insurance Trust Fund loan amounted to $9.2 billion. The Department of Labor (DOL) has already paid back 11% or more than $1 billion and is working with state leaders to aggressively reduce the principal balance. State law requires employers who make unemployment insurance contributions to pay the IAS on the federal loan annually, until all interest has been paid off.

Notifications about the surcharge started going out to employers, with information about the IAS rate (.23%), the annual charge for 2022 (about $27.60 per employee), and how to pay. Payment must be made within 30 days of date of the notice (and by September 30, 2022 at the latest).

If you have an account on NYS Online, you can find your payment amount on NYS-45, line 6: “UI Previously underpaid with interest.” If payment is not made when e-filing your 2nd quarter 2022 NYS-45, make a check payable to NYS Unemployment Insurance. We recommend noting your NYS Unemployment Insurance Employer Number and “IAS” on the memo line. Then mail it to:

NYS Unemployment Insurance
P.O. Box 4301
Binghamton, NY 13902-4301

For more details and information, visit the New York State DOL website’s IAS page. If you have questions, call the NYS DOL’s Employer Hotline at 1-888-899-8810 (select One for Main Menu, and then One for Employer Accounts Adjustment Section of the Unemployment Insurance Division).

As always, you can reach out to your person at RBT CPAs, LLP/Sickler, Torchia, Allen & Churchill CPAs, P.C. if you need any additional assistance with this or other accounting, tax, and auditing matters.