Alternating proprietorships and contract brewing are becoming common themes within the craft brewing industry. But it’s important to understand how these strategies can add layers of complexity to your business. Who owns what? How will you manage inventory that different people own? How do you calculate the value?
We outline the challenges below as well as shed some light on how generic bookkeeping software may be holding you back.
Alt Prop 101: What is an Alternating Proprietorship?
The TTB defines an alternating proprietorship as an arrangement in which two or more people take turns using the physical premises of a brewery.
In an alternating proprietorship, the tenant brewery is responsible for:
- Producing beer
- Keeping appropriate records
- Labeling with your own name & address
- Obtaining necessary COLAs
- Paying taxes upon removal of beer from the brewery
The Challenges of Alternating Proprietorships
Whether it is ingredients or packaging components, you probably have items that proprietor A owns, or some that proprietor B owns. The main challenges of alternating proprietorships (and contract brewing) include:
- Keeping track of what gets produced
- What is used to produce for each proprietor or contract
- What inventory we have on hand for each individual proprietor or contract
- Identifying and differentiating the values of the inventory owned between 2 proprietors
- Generating TTB Reports for each proprietor
Why bookkeeping software can’t handle alternating proprietorships
Generic bookkeeping software lacks the ability to separate a single inventory item into two different costs – yours and theirs. If you own bottles that cost you 20 cents and have bottles the alt prop has provided, generic bookkeeping software will average the cost of the two. The resulting cost discrepancy means you’ll likely resort to your multi-tab spreadsheet to recalculate your actual costs, OR you’ll create “phantom items” in the bookkeeping software to represent the inventory of contracts.
Figure 1 Illustrates how the management of a simple inventory item like bottles can be misrepresented in generic bookkeeping software.
Brewery Management Software for Alternating Proprietorships
Figure 2 illustrates how OrchestratedBEER brewery management software uses individual warehouses to differentiate item costs at the warehouse level instead of averaging them all together in a single warehouse. This means when you bring items like bottles or grain into stock from a contract brewery or alternating proprietorship you can assign them to separate warehouses. This allows you to track both the cost and remaining inventory left in the contract for better accountability.
It also eliminates the need to create multiple “phantom items” to represent the same item. Figure 2 illustrates how this works:
TTB Reporting for Alternating Proprietorships
The final step is TTB reporting. OrchestratedBEER allows brands to be assigned to individual TTB entities so that any brands produced for that particular entity is segregated in the TTB report. Rather than manually sifting through spreadsheets or paperwork to segregate the numbers for the TTB report, all you need to do is select a dropdown from OBeer’s TTB report interface. This allows you to generate separate TTB reports for each TTB entity with a selection from a drop-down menu.
What to look for in Brewery Management Software
There are several options to consider when looking for the best brewery management software for your brewery. Be mindful of the fact that other brewery management software tools rely on syncing data from a web-based production tool to generic bookkeeping software. While this sounds convenient, these syncs don’t always work and certainly can’t provide the segregation needed for an alternating proprietorship scenario.
OrchestratedBEER is the only brewery management software solution able to handle alternating proprietorships and contract brewing for the following reasons:
- OBeer associates individual brands with proprietorships
- OBeer segregates who owns the inventory
- OBeer provides accurate costing for each entity
- OBeer can generate segregated TTB reporting for each entity
If you’re considering an alternating proprietorship or contract brewing scenario for your brewery, an all-in-one solution with accounting built in is critical if you want to avoid the manual work and external spreadsheets.