Cost Accounting is Essential to Brand Builders


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We recently spoke to several hundred Accounting Students at Lethbridge University at their Calgary campus. As brand builders, how could we resonate with this audience? How were we going to inspire accountants?

Cost Accounting, that’s how! Yes, it turns out that without great cost accounting there would be no Barefoot Wine brand, nor likely any other global brand. Cost accounting creates the primary metrics that drive brand expansion strategy. Without it, you’re flying blind!

So, now accounting is actually starting to sound, well, exciting! Barefoot Wine was already a proven brand in California, but we had false starts in other parts of the country. Because we didn’t fully understand the true cost of sales, like so many other brands, we over-extended ourselves right off the bat.

We were a big hit in California, why not other markets? We failed to sustain several new markets because we didn’t think we needed a representative there.  That was a new cost we thought we couldn’t afford. Taxes, shipping, and incentives to local distributers varied as well as programming with local retailers. The costs of sales just about broke us!

Then we had the good fortune to a hire a new CFO who specialized in Cost Accounting. In retrospect it was our smartest move. Doug McCorkle, who called himself “The Cork, because somebody has to put a stop to it,” was a godsend. Doug took a good look at our costs and provided us for the first time with a clear picture of all the incremental costs that made up, in our instance, a case of wine. Turns out it was not just the cost of goods sold, but all the costs, including the many varied costs of sales in each territory.

He actually got to a point where he could tell us when and where we could expand – and why. We had to turn down customers who were in territories where we could not yet afford to do business. What if we didn’t know we couldn’t afford it until it was too late, but were already committed?

One thing we learned the hard way as brand builders was that it’s better to never be in a market than to be there and fail. We knew from experience that when customer service suffers from over expansion, brand reputation suffers. Doug gave us the heads up we needed to use our cash flow to successfully expand, cautiously, market by market. We knew exactly how long and at what rate of sales any new territory had to perform before we could afford to open another. All the while we carefully built our reputation for excellent customer service.

Most brands put a lot of focus into supply chain management, but that alone won’t build your brand. To build your brand you need to understand the financial implications of every sale with a good Cost Accountant. We found, for instance, that due to the reduced cost of sales, selling to some remote markets was much more profitable than in some closer markets, where the cost of sales was astronomical.

Thanks to our reliance on cost accounting, we opened in some pretty unlikely territories and left the more obvious, yet expensive, ones for when we had the funds to support them. This became our brand building strategy, and it worked!

So the next time you hear someone say accounting is boring, think about how exciting it can be to actually know where you are going and how quickly to build your brand with the aid of a good Cost Accountant!