Planning cash around excise payment dates

Why excise catches profitable breweries out

A brewery can sell well, show a profit on paper and still struggle to pay duty on time. The cause is timing. Duty is often due on a fixed date after beer leaves the brewery or after a set period. The money from the trade may arrive 30 or 60 days later, or longer for some customers.

So in a growth month the order is: you ship more beer, the duty bill rises first and the cash from that beer lands afterwards. Growth makes the gap wider. This is the same working capital squeeze that hits any business that pays a tax up front and gets paid later.

Our guide to excise duty on beer in India explains the general structure. This guide is about the cash side of it.

Find your dates first

Alcohol is a state subject in India, so the payment method, the due dates and the penalties for late payment differ from state to state. They also change. We cannot give you your dates. You can find them in your licence conditions and the current excise notifications, or by asking your licensing consultant or the local excise office.

Write down, for every payment you owe the excise department:

• What triggers it, such as removal of beer, production or a licence period.
• The due date and the cut-off time on that date.
• How it is paid and what proof you need.
• What happens if you are a day late.

Put those dates in one shared calendar. Include licence renewals, which tend to arrive as a large single payment.

Build a 13 week cash forecast

A 13 week forecast is a spreadsheet with one column per week and three blocks: cash in, cash out and closing balance. It is the simplest tool a small brewery can use. It works.

Cash in comes from your sales, shifted by how long each customer actually takes to pay. Use the real average from your ledger, not the terms on the contract. Cash out lists malt, hops, wages, rent, power and gas. Then add the excise dates as their own rows, in the week each payment falls.

Update it every week. Replace the forecast with the actual numbers for the week just gone and push the horizon out by one week. After a month you will see how far off your habits are.

An illustration with round numbers

Take a hypothetical brewery. It ships 100 units of beer in a month. Excise comes to 20 units of that sales value and is due on the 7th of the next month. The customers pay on 45 day terms.

Beer shipped on 1 March earns cash around 15 April. Its duty is due on 7 April. The brewery pays the duty about eight days before the customer pays. Wages and malt for that beer went out weeks earlier still. If March was a big month, the 7 April payment is big too. April's own customers have not paid yet.

The numbers are made up. The pattern is not. Run it with yours and see how many days the gap is.

Ring-fence the duty

The simplest control is a separate bank account for excise. Each time you invoice, move the duty share of that invoice into it, or do it weekly. The account then holds what you will owe, whatever the month looks like. When the due date comes, the money is there.

This does not create cash. It stops you from spending money that was never yours to spend. Many breweries get through lean months by quietly borrowing from the duty money. Then the duty date arrives and the hole is visible.

The festival squeeze

Festival season and year end bring higher volume. They also bring a higher duty bill, shipped before the cash comes in. If you plan for a rush, as in our guide to planning brewery capacity for a festival season rush, plan the cash too. Add extra malt and packaging spend, extra staff cost and the larger duty payment into the same weeks.

Also check which public holidays fall near a due date. A payment due on a bank holiday may need to be made a day early. Ask your adviser how your state treats that. Staff leave is a related squeeze, so look at planning staff leave around festivals and peak weekends at the same time.

What to do when the cash is short

If the forecast shows a hole six weeks ahead, you have options. If it shows a hole next Monday, you have fewer.

• Ask your largest customers to pay on shorter terms, or offer a small discount for payment within a set number of days.
• Delay a non-urgent purchase such as a new tank by a month.
• Phase malt and hop orders rather than buying for a whole quarter.
• Talk to your bank early about a working capital line, before you need it.

Do not skip or short-pay duty to solve a cash problem. Penalties and licence risk make it the worst place to save money.

Common questions

Why is excise a cash problem even when the brewery is profitable?

Duty falls due on a fixed date, often before the customer pays the invoice for that beer. A profitable brewery can still run short in the gap between the two.

How do I find my excise payment dates?

They sit in your licence conditions and the current state excise notifications. Rules vary by state and change, so check with your licensing consultant or the excise office.

What is a 13 week cash forecast?

A weekly spreadsheet of cash in, cash out and closing balance for the next quarter, updated every week with actual figures. It shows shortfalls well before they arrive.

Should I keep excise money in a separate account?

It helps. Moving the duty share of each invoice into its own account means the money is there on the due date.