A bakery business is like any other business in that it is extremely important to know your numbers. Being aware of your profits and losses is what distinguishes your business from a hobby. Many pastry producers have no idea how important bookkeeping is. Similar to measuring ingredients for a cake, what is measured can continuously be improved. Chances are, your special recipe for cakes has improved and what encouraged you to start a business in the first place. However, at the end of the day, it is still business and your pastries must be accounted for. If you’re looking to grow and expand your bakery business in any way, you must measure it. Otherwise, why go into business, right?

Bookkeeping should be done frequently and regularly. You could choose to use a simple excel spreadsheet that costs nothing or buy bookkeeping software that will add to your overhead expenses. Is it worth it? Probably, but you must decide if you have it in your budget to do. The first step to getting started is getting started!

Take action now, as in, today. Make a schedule on your calendar to remind you when you will revisit your books and get caught up. Decide how long it will take you and commit to having it completed in a specified period of time. Next, schedule a regular appointment with yourself to regularly revisit your bookkeeping. Whether you carve out time daily, weekly, or monthly, you’ve made it a priority to stay on top of your accounting for a bakery business. However, you must stay up to date at least monthly.

Get organized for accounting for bakery business

The basic chart of accounts includes business assets, liability, and equities. For bakery businesses, assets are defined as the baked goods, machinery, equipment, furniture, and other items you own. Bakery revenues are categorized by the receipts for baked goods. You should have your bakery supervisor tally and balance out the register daily to ensure accurate sales. Bakery expenses include rent, ingredients, utilities, insurance, and vehicle and fuel expenses for deliveries and salaries.

 

bookeping bakery business photo

Small bakeries typically struggle with bookkeeping for product costs and accounting for employees. Product costs are associated with all the baked goods you sell to customers. Therefore, the costs of goods sold include direct labor, materials and overhead involved in your baking process. Direct materials include raw materials like sugar and flour. The direct labor costs are those associated with the salaries and benefits of the employees. Overhead is the portion of the manager’s salary but is also rent and utilities.

Employees should be accounted for through income tax, Social Security, Medicare, unemployment taxes, and state income tax. If you chose to use accounting software, there will be a built-in payroll module feature that will calculate this for you. Whatever method you chose, be careful with Uncle Sam.

Types of accounting for bakery business

There are different methods of accounting for a bakery business but no matter which one you chose, you must know your numbers. Choosing a cash basis of accounting suggest that income and expenses aren’t recorded until they have been received or paid. This is clarified and supported by the IRS. The drawback of this method is that it is not always an accurate representation of where your bakery stands. It can complicate inventory. The accrual method allows bakeries to record income and expenses when they are earned or incurred, regardless of when they are received or paid. This method requires that you record the sale even if you are not paid on it for another month. It provides a more accurate representation of where your business stands.

One of the most critical elements of operating your bakery business is the accounting. We can’t stress enough the importance of knowing your numbers and understanding your revenue streams and business expenses. If you want to see more articles like this one go check out our website.