July 30, 2015

Accounting For Food Waste

food wasteThe idea of food waste – be it the carrot greens you’re throwing away or the perishable products that didn’t sell at the farmers’ markets – are big topics of conversation lately in the food world (see below for some of the articles that have recently been published on other sites about food waste both from the consumer side and from the business side).  However, no matter how conscientious you try to be as a food entrepreneur, you are likely going to encounter some form or food waste and it’s important that you account for it.

By account for it, I do mean – actually account for it in your financial projections and your accounting books.  Almost every food company is going to have some level of waste, even as many of us actively try to reduce our waste, there are simply some things that can’t be avoided.  Did you hand out samples at a retail store promotion and have a few samples left (or maybe you have half a jar of your salsa left after that event)?  It wouldn’t be ethical or hygienic for you to re-package the remaining samples and try to sell them – that’s and example food waste.  Did you prep for a catering event or prep to take your food truck out on the road only to find that you had fewer guests at the party or fewer customers at your truck than you anticipated?  Those leftovers that can’t be stored and/or frozen and used later – that’s another example food waste.

No matter what type of food business you have, if you have food waste you do need to account for it in terms of the cost of goods sold associated with it.  For example, if it cost you $2 to make Product X and you’re throwing away 3 of them at the end of the day, than that’s $6 worth of costs that you’re tossing out and that should be input into your accounting books.

The reason you want to account for food waste is twofold.  First of all, those are tangible business costs that may ultimately lower your Gross Profit and, potentially, your business’ taxable income too.  Secondly though, keeping track of waste and putting a dollar figure to it can help you realize how much money is literally being thrown away.  That in and of itself may spark ideas about what you may be able to do to reduce your food waste and, in turn, reduce the amount of money you’re throwing into the trash.

As always, you should consult with an accountant about any and all changes to your accounting methods and potential business deductions.

Recent Articles About Food Waste:

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