Why are profitable craft brewers struggling with cash flow? CreditorWatch Collect investigates.
Concerns about long lag times and late payments have bubbled to the surface in the craft brewery industry in recent years.
Andy Parker, the founder of UK craft brewery Elusive Brewing, told Good Beer Hunting that he had received payment only last week for an invoice from 2017. Parker also had several other unpaid invoices that had been overdue for a year.
According to Good Beer Hunting, breweries that are unable to get credit terms with their suppliers end up shouldering the debt for the entire supply chain.
This is also further exacerbated by long lag times between brewing, transport, and the credit period – a gap that can grow to seven or eight weeks before it’s even contractually overdue.
“We’re going through an expansion right now, and if I were to immediately receive all the money that is currently overdue, we would do a whole lot more than we currently can do,” he says. “It has literally held back our growth.”
Cloudwater Brew Co.’s founder Paul Jones also told Good Beer Hunting that overdue invoices hindered any opportunity to expand capacity or improve processes.
“Early on, one supplier was months late paying £15,000,” Jones told the leading voice on all things craft beer. “That kept me awake for months; we were flying so close to the wind it was untrue.”
“My ability to put our profit to use, fund new equipment, and better support my staff is still massively impaired because we don’t reliably know when and sometimes if we’re going to be paid.”
The lack of cash flow has played a part in several liquidations in the U.K. beer market. A recent study by financial firm UHY Hacker Young found that British breweries were closing about as quickly as they were opening for the first time since the boom began around a decade ago.
What are craft brewers doing to tackle the issue?
Some bigger breweries seem to accept that costly legal battles and debt collection agencies are the only way to deal with willful late payers.
London-based Gipsy Hill Brewing Company’s Co-Founder believes breweries need to look at themselves and their systems to make sure they are set up to protect their interests.
“At its worst, around 40–50 per cent of what we were owed was overdue on 30-day terms, which is shocking,” says Sam McMeekin.
“So we downloaded a new system that plugged directly into our accounting software, took into account the insurance level and automated all our chasing communication. Within three months our overdue debt fell to five per cent.”
If you’re a craft brewer or a business who’s struggling with late payments and staying on top of cash flow CreditorWatch Collect’s here to help.
Book a 15-minute FREE consultation with one of our amazing specialists, or jump right in and trial our software for 14-days – no credit card required.
Click here to read Good Beer Hunting’s full report.