As a growing CPG (consumer packaged goods) startup, you need tools that help you maximize efficiency and set you up for success as you scale and your market share grows.
Many early-stage CPG startups overlook their tech stack and then play catch-up later on, incurring a ton of lost revenue and cleanup expenses. If you want to get ahead of the competition and stay there, building a strong technology foundation is a must-have, not a nice-to-have.
The size of the average tech stack varies widely from company to company. While some stay lean, many organizations end up with hundreds of digital tools as part of their operations.
For CPG startups, it’s important to keep your tech tools realistically within your budget. When you sign up for software programs indiscriminately, costs will quickly balloon out of control.
Making sure that your tech stack integrates smoothly is another crucial consideration. If your tools don’t work together properly, the technology will actually make your operations more inefficient and ineffective.
Graphite has helped hundreds of CPG startups set up their financial and operational tech stacks, from inventory management systems, integrating Stripe with Shopify, AP tools, accounting softwares like QBO and NetSuite, etc.
Below are our recommendations for the tech stack tools CPG startups need to scale, grow, and understand their economics (if you need help with your tech stack, feel free to reach out to us here).
Your accounting software serves as the home base for your company’s finances. This software is the backbone of your entire accounting infrastructure.
Accounting software stores, organizes, and manages all of your company’s financial operations. You’ll use this software to record transactions and produce basic financial reports like P&Ls and balance sheets (which you will eventually use to file your taxes!).
Setting up your accounting software should be the first step when building your tech stack. If you’re not sure where to get started, consider working with a firm like Graphite to get your financial operations off the ground.
As a CPG startup, you likely work with a variety of vendors that you need to pay quickly and efficiently.
An effective accounts payable tool helps you track and manage all of your vendor payments in one place. It also helps you stay compliant with the IRS come tax time.
You also need a tool to manage invoices and payments from your clients.
Today’s customers expect to be able to pay their bills online. If you don’t provide the option for online payments, it will negatively affect the overall customer experience as well as how many customers will complete a purchase with you in the first place.
In addition to offering an online purchasing option, we highly recommend having a tool that streamlines the customer payment process and produces solid records of your collections. This efficiency will benefit both your customers and your operation.
Finding the right credit card and bank for your startup feels like a simple choice—until you realize how many mind-boggling options there are.
A financial institution is one of the biggest choices your startup will make. You want to establish a solid partnership from the get-go.
Luckily, many modern banks actively support startups. Here are the ones we like to work with:
Credit Cards:
Banks:
Inventory management is one of the biggest challenges for early-stage CPG startups. We highly recommend using software to handle this process, especially if you’re an eCommerce company.
This kind of tool keeps you organized, minimizes the risk of error, streamlines costs, and establishes a process that can last even as your company scales. All of this ultimately means a healthier bottom line for your business.
Inventory software also helps you identify the most cost-efficient methods for ordering new products. It can even help you forecast inventory to minimize risk.
There are many nuances and compliance regulations to keep in mind when it comes to payroll and benefits. You never want to get into a situation where the Department of Labor is knocking at your door.
We highly recommend working with a PEO (Professional Employer Organization) who handles the nitty gritty compliance details for you.
In the U.S., merchants are only required to collect sales tax in states where they have a “sales tax nexus.” This is regardless of whether they have brick-and-mortar locations or are an online seller.
Sales tax nexus is just a fancy legalese way of saying “a significant connection” to a state. If you have nexus in a state, then that state considers you on the hook for charging sales tax to buyers in the state. You’ll always have sales tax nexus in your home state, but you may find that certain business activities create nexus in other states too.
It is extremely important to stay on top of your sales taxes. If you don’t, you may receive hefty fines from multiple states down the road. This is another area where we provide a lot of support for our startup clients at Graphite.
Startups need to keep track of ownership from the beginning. If you don’t have ownership documented, you’re going to have a difficult time raising capital in the future.
You also need to understand your options when it comes to adding and retaining top talent. Cap table management helps you stay on top of your ownership options, ensuring that ownership is clear to all parties involved.
Deferred revenue is money received in advance for products or services that will be delivered in the future. If you don’t track your deferred revenue, you could end up overstating your revenue, which affects your KPIs.
Tracking deferred revenue can be a tricky process for beginners, but it’s best to start establishing this process early. In addition to using a revenue recognition tool, don’t be afraid to bring in financial experts to help you get your footing.
For a founder-friendly breakdown of revenue recognition and the difference between accrual and cash accounting, check out our tutorial.
CPG companies always exist in highly competitive markets. You need the right operational and financial tech stack to mitigate against hiccups and lost opportunity. Building a reliable tech stack should be a priority for any growing CPG startup.
If you’re not sure where to start with your tech stack or need help with bookkeeping or accounting, Graphite is here to help.
We offer fractional accounting and finance services for startups. Learn more about our tailored services for eCommerce and consumer brands. However, compared to SAFEs or convertible notes, these rounds take longer to complete because they involve agreeing on a valuation and undergoing extensive due diligence.