Minding the Money: Healthy Finance Tips


finance tips
Source: Bank of Canada

Financial health is crucial for survival in today’s hyper-competitive market. Managing the finances of a food business is especially challenging because margins can be low and supermarkets negotiate hard for EDLC (every day low cost). 

For brand owners, increases in commodity costs, utilities and labour are a fact of life, but difficult to recoup. Add to that enormous listing fees and the necessity to spend on promotions to motivate shoppers to choose your product over competitors. Going into retailers with a cost increase is a difficult conversation and can lead to sales declines or a delisting altogether. 

We asked our associate Ashley Cuff, a CPA (Chartered Professional Accountant) who co-founded a packaged foods brand, for some advice.

Cash flow is king

A brand owner told me they need a loan to buy ingredients for a large order. That’s a cash flow problem! 

Ashley advises to stay on top of accounts receivables and payables. Prepare a weekly cash flow statement to avoid costly surprises. Being tight on cash when invoices are due can damage supplier relationships and result in short shipments to customers. If balloon financing is required to tie you over, interest can be very high and should be avoided.

Cash flow statements are also indispensable for strategic forecasting when working on a three-year plan, helping you plan cash needs in advance, whether from debt or equity financing.

Negotiating with suppliers

Make an effort to form a mutually beneficial relationship with suppliers. Establishing a track record of on time payment will build trust, which can be advantageous.

Constant procurement negotiation is critical to keep costs in line with inflation and grow profitability. Always look for ways to reduce costs, and negotiate for cost reductions when renewing contracts or launching new skus. Include payment terms in negotiations. 

Retailer discounts and deductions

Make sure you understand discounts taken by retailers and incorporate them into your pricing. Also be prepared to dispute them.

Retailer deductions can be a nightmare. Stay on top of them. Deductions for promotions can trickle in over several months. Create a promo calendar forecast with anticipated sales volume and track actual deductions against it.

It takes money to make money

A well funded business gives you the freedom to innovate and grow. Take advantage of abundant funding resources such as government grants and loans, BDC (Business Development Bank of Canada), EDC (Export Development Canada), Farm Credit Canada, traditional banks and angel investors, to name a few. 

Help is at hand

If your financial knowhow is weak or you’re procrastinating, as many of us do when we don’t enjoy a task, seek help. Using a bookkeeper to take care of payables frees up time to operate and grow the business, but be sure to monitor what’s going out the door.

A financial adviser who thinks strategically and understands the intricacies of operating a packaged foods business is worth his/her weight in gold. Ashley provides a unique service as a “fractional CFO”, available on a part-time basis if a full-time CFO is not practical.

Final words: have a focus on profitability and a path to profitable growth. Reinvest a portion of profits in new product development, marketing and advertising to drive sales.

Practicing financial management is essential to build a healthy and sustainable food business. It’s a matter of dollars and sense.

As a packaged foods consultant, Birgit Blain helps clients think strategically to build a sustainable brand. Her experience includes 17 years with Loblaw Brands and President’s Choice®. Contact her at Birgit@BBandAssoc.com or learn more at www.BBandAssoc.com

© Birgit Blain

This article appeared in Food in Canada magazine.

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  1. Barbara Onyskow

    Good Points to consider. Thank you for sharing.

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