Accounting for Food and Beverage Manufacturers in BC
Making food for sale means thin margins, perishable stock and buyers who deduct fees before they pay. You need a cost for every unit, a count you can trust and records that stand up to both the CRA and a food safety inspector.
EverStone CPA works with BC food processors on costing, inventory, bookkeeping, payroll and tax, entirely online, at a fee fixed in writing before we start.
Quick answer: A food manufacturer’s numbers rest on product costing. Once you know the true cost of each unit, including yield loss, packaging and labour, you can price wholesale accounts properly. You can also value inventory at year-end and spot which lines lose money.
Food businesses we work with
Our food clients make products in a commercial kitchen or plant and sell them to stores, distributors, food service or direct to consumers online.
Some started at a farmers’ market and now supply grocery chains. Others pack for other brands under contract. The accounting questions change as the business moves from one stage to the next.
- Bakeries and specialty producers supplying cafés and grocers
- Sauce, condiment, snack and frozen meal makers
- Meat, seafood and dairy processors working under federal or provincial licences
- Non-alcoholic beverage, kombucha and juice producers
- Co-packers making products for other brands
- Producers moving from a shared kitchen to their own facility
Incorporating a food manufacturing business
A market stall run by one person can stay a sole proprietorship for a while. Once you sign a lease on a plant, hire a crew or supply a grocery chain, a company usually makes more sense.
Supplier and buyer contracts
Large buyers, landlords and lenders tend to expect a corporation on the other side of the agreement. A company also holds the product liability exposure separately from your home.
Retaining profit for growth
Growth in food ties up cash in stock, equipment and receivables. Profit kept in the company is taxed at the 11% combined small business rate, which leaves more to fund that growth.
When it is too early
If sales are small and you use every dollar of profit personally, the cost of a T2 return and separate books can outweigh the benefit. We look at the numbers before recommending a change.
Use the incorporation calculator for a first look, or see our should I incorporate guide. Incorporation advice covers the move itself.
How food business owners pay themselves
Owners of a growing food company often draw less than they could, because inventory and receivables soak up cash. Planning the draw protects both you and the plant’s working capital.
Wage through payroll
You can sit on the same payroll as your production staff. Your wage is a deductible cost to the company and counts toward CPP and RRSP room.
Dividends when cash allows
A dividend can be declared once a good quarter turns into cash in the bank. It needs no source deductions, but adds nothing to CPP or RRSP room.
Keep the cash cycle in view
Before any draw, check what is owed to suppliers and what buyers still owe you. Paying yourself out of next month’s ingredient money is a common trap.
Model it with the salary vs dividends calculator or read what dividends mean for your CPP.
GST and PST on food products
Sales tax on food depends on the product. That makes product classification one of the first jobs when you add a new line.
Zero-rated and taxable food
Many basic groceries are zero-rated for GST, which means no GST is charged but you can still claim input tax credits. Some snack foods, sweets, beverages and prepared foods are taxable at 5%. Each product needs checking.
PST in BC
Most food for human consumption is exempt from BC PST, but some items, such as certain sweetened drinks and confections, are not. Packaging, equipment and supplies you buy can also carry PST.
Production exemptions
BC offers PST exemptions for some machinery and equipment used in manufacturing. Whether your equipment qualifies depends on how it is used, so we review it before you buy.
See zero-rated vs exempt supplies and the BC PST guide. Our GST and PST filing handles both returns.
Product costing, yield and margins
A recipe card is not a cost. The real cost of a unit includes every ingredient at today’s price, the yield you actually achieve, packaging, labels, labour and a share of the plant’s overhead.
Yield and waste
Trim, cooking loss, rejects and short-dated product all reduce what you can sell from a batch. Tracking yield by product shows where margin goes missing.
Buyer deductions
Grocers and distributors often deduct listing fees, promotions, spoilage and chargebacks from what they pay. Each one is a cost of selling to that buyer and should be recorded as such.
Margin by channel
The same jar can earn very different margins online, at a market, through a distributor and in a chain store. Reporting by channel shows where to grow.
Our pricing and margin analysis builds the cost model with you, and management reporting keeps it current each month.
Inventory, lot records and bookkeeping
Food inventory spoils, expires and moves fast. Your books and your production records should tell the same story about what came in, what was made and what went out.
Raw, in process and finished
Ingredients and packaging, product mid-run, and finished cases in the cooler or freezer are counted and valued separately. A monthly count keeps cost of goods close to reality.
Lot and batch records
Lot codes tie each batch to its ingredients and its buyers. Those same records support your cost of goods and any write-off for a recalled or expired lot.
Software that talks to the books
Whether you use an inventory app, an e-commerce store or spreadsheets, we connect it to the ledger so sales, stock movements and costs flow in one direction.
See inventory accounting in BC and our monthly bookkeeping. Producers selling online may also want the e-commerce accountant page.
Food safety records, licences and grants
Food businesses answer to more than the CRA. Selling across provincial lines can require a federal food licence. Local plants work under health authority permits. Larger buyers often ask for third-party audits.
Accounting cannot replace a food safety plan. It can make sure licence fees, audit costs, testing and sanitation are recorded properly. It also helps you keep supplier invoices and receiving records together, which serves both an inspector and a tax reviewer.
Product development work may qualify for SR&ED, claimed on Form T661, and grants for equipment or market expansion come and go. We look at each in general terms against your plans and help keep the records a claim would need.
Production payroll, shifts and WorkSafeBC
Production crews often work shifts, overtime and seasonal peaks. Each needs to be paid correctly, with vacation pay of at least 4% rising to 6% after five years, and with BC statutory holidays handled properly.
Food plants carry real WorkSafeBC risk from knives, heat and lifting, so registration and accurate payroll reporting matter. If your BC payroll passes $1,000,000 in a year, the Employer Health Tax applies. T4 slips are due by the last day of February.
Our payroll services cover shift crews, and the BC stat holiday pay calculator helps with holiday weeks.
Equipment and CCA
Ovens, mixers, fillers, coolers, freezers and delivery vehicles are claimed through capital cost allowance by class. Plant improvements in a leased building are usually a separate class. The manufacturers’ inventory, WIP and CCA guide covers how these are handled at year-end.
Month-end checklist for a BC food manufacturer
Run through this each month. It keeps your costs current and makes year-end mostly a review.
- Count stock by stage. Ingredients, packaging, work in process and finished goods.
- Record write-offs. Expired, damaged and rejected product, with lot codes.
- Update ingredient costs. Bring recipe costs in line with the latest supplier invoices.
- Post buyer deductions. Match each remittance to its invoices and record every chargeback.
- Reconcile online and card sales. Tie payouts to orders, net of fees and refunds.
- Close payroll. Check hours, overtime and holiday pay for the month.
- Reconcile every account. Bank, credit cards and any equipment loans.
- Review margin by product and channel. Flag any line that costs more to make than it earns.
- File compliance costs. Licence renewals, audit fees and lab testing invoices.
You may share this checklist with other food businesses or link to it: everstonecpa.com/accountant-for-food-manufacturers-bc#month-end-checklist.
What food manufacturers pay us
We quote after a free consultation and fix the fee in writing. Published starting points:
- Monthly bookkeeping, buyer remittances and inventory entries, GST and PST filing included: from $300 a month
- Product costing and monthly margin reports as a fractional controller: from $1,500 a month
- Cash planning, lender packages and growth forecasts as a fractional CFO: from $2,500 a month
- Year-end statements and the company’s T2: quoted after a free consultation
- A single question answered on an Advice Call: $200 + GST
See full pricing and our corporate tax return service.
Questions from food and beverage makers
Do I charge GST on my food products?+
How often should we count inventory?+
A grocer keeps deducting fees from our payments. How do we record them?+
Do you work with food businesses outside the Fraser Valley?+
Written and reviewed by a Chartered Professional Accountant at EverStone CPA, an Abbotsford CPA firm working remotely with businesses across British Columbia. Updated . Food producers are welcome to read client reviews before reaching out.
Related reading
More for producers and processors.
Send an enquiry
Tell us what you make, who buys it and where your inventory and sales records live today. You will hear back from a CPA within one business day with the next step and a written fee.