The Art of Budgeting for Your Distillery

In today’s economic climate, effective budgeting is of the utmost importance for small businesses. And the magic of budgeting can truly be the heart of distillery success. Here, we take a dive deep into the art of budgeting and unveil the secrets that can set your distillery up for sustainable success.

Why Budgets Matter: Aligning Dreams and Reality

At the core, a budget serves as the compass that aligns your vision with tangible, SMART (specific, measurable, achievable, relevant, and time-bound) annual goals. These SMART goals then cascade down, becoming the backbone of each department’s goals, intricately woven into the financial fabric of your distillery.

The Craftsmanship of Budget Writing

Let’s demystify the process of budget writing, shall we? We’ll break it down into five steps.

Step #1: The Sales Budget

Start with the star of the show—the sales budget. It’s not just about revenue; it’s about crafting a detailed plan, breaking down sales volume by SKU for a comprehensive understanding.

Got a tasting room or a restaurant? Give them the spotlight with their own sales budget, distinct from wholesale sales. The person handling accounting then merges these into a single sales budget, setting the stage for financial unity.

Step #2: The Production Schedule

Once sales goals are set, it’s time for the real magic: crafting the production schedule. Whether it’s batches, blends, or bottlings, align them strategically to support the budgeted sales volume by SKU.

Step #3: Materials and Labor Budgets

As the production schedule takes shape, the supply-chain and production managers step in to create direct materials and direct labor budgets. For those with a tasting room or restaurant, the general manager joins the party, drafting a cost of goods sold (COGS) budget and a labor budget based on related sales.

Step #4: The Expense Budget

Simultaneously, the sales-and-marketing expert crafts their expense budget from the consolidated sales budget.

The controller or CFO adds the finishing touches with the operating expenses budget. Finally, the accounting wizards weave these individual budgets into the grand tapestry of the organizational budget.

Step #5: Review the Projections

This is where the leadership team takes a first glance at the financial projection for the year. Is it harmonious with the agreed-upon annual goals? Are tweaks needed? A collaborative discussion follows, with recommendations and revisions flowing back and forth until the budget emerges as the best, most reasonable guide for the year.

Using the Budget as Your Compass

But we’re just getting started! The budget isn’t a one-hit wonder. It’s your companion throughout the year. Monthly financial-review sessions become the spotlight, with key performance indicators (KPIs) and budget vs. actual reports taking center stage.

The beauty lies in curiosity, not blame. Variances are not red flags. They’re invitations to explore, to understand why reality deviated from expectations. As each department explains the differences, operational adjustments come to light, steering your distillery back on course.

Navigating Budget Challenges

Creating a budget may seem daunting, but trust us, it’s a game-changer. It reinforces your distillery’s vision, aligns your team, and sets the stage for success.

And what about the hurdles? Embrace them! Challenges are the spice that adds flavor to your journey. From unexpected market shifts to dynamic consumer preferences, your budget can adapt and evolve, ensuring your distillery not only survives but thrives.

Want to see budget-making in action? Watch the on-demand How to Build Budgets That Empower Distillery Performance webinar featuring Maria Pearman, a CPA with 10+ years of public accounting experience and extensive knowledge of the beverage industry. Watch it here.