Practice Profile: A perfect blend
KBS CFO founder and CEO Robin Thieme works with liquor companies in her role leading the Washington, D.C.-area accounting practice, so she understands that one of their driving challenges is getting their bottles on store shelves. In facing that challenge, these companies require the kind of customized accounting, business process restructuring and CFO services her company provides. As the market has ballooned in recent years, this is particularly true of the early-stage and startup distilleries KBS now advises.
“The industry itself really goes through booms and busts — they’re now in the process of a boom,” Thieme explained. “There could be a point where, as hard as it is to believe in the business, people will become less interested in bourbon — as it’s a little oversaturated. It does happen. Right now there are a lot of entrants into the marketplace. The challenges distilleries have — one we cannot help them with — is getting themselves on the shelf, competing in the marketplace against huge leaders like Jim Beam. The smart ones, the clients I’m working with, recognize the nitty-gritty cost-to-goods — how much it costs to make a case of whiskey.”
In addition to clients in the spirits and liquor industry, Kensington, Maryland-based KBS also works with manufacturing, government contractor and e-commerce clients. Since Thieme founded the practice in 2004, it has provided virtual and outsourced CFO and accounting services, though she prefers the term “fractional provider” to the profession’s more favored client accounting services, or CAS.
“I started KBS when I saw there was a growing demand from these businesses that needed services beyond just bookkeeping but didn’t have the budget or need to pay for the full-time equivalent, or the three-to-four-person accounting department,” Thieme explained. “The problem our industry has, is we haven’t latched onto names the small-business community understands. In the accounting world, for the AICPA and other leaders, client accounting services made sense to them. It doesn’t make sense to the average business owner; they don’t have a clue what that means. ‘Fractional’ means something to them … We’re still kind of working on the terminology that will resonate in the business community.”
The total package
The fractional descriptor works very well for KBS’s liquor clients, Thieme reports, which include three to four distilleries and a kombucha maker. The firm is also in talks with both a cidery and a Japanese whiskey company. The clients range from startup to established, though one in particular, whiskey maker James E. Pepper, is something of a hybrid. The Lexington, Kentucky-based company was originally a whiskey distillery in the 1800s before it was shut down in 1958, then relaunched by entrepreneur Amir Peay 50 years later and only began distilling on-site again in 2017.
“[Clients are] a spectrum from hobbyists to people so focused on the sales side, they don’t have the attention span for cost of production,” Thieme shared. “The distilleries I’ve worked with, they value the financial information they’re getting, and are some of the best relationships. We’re a boutique, we go deep … we dont have a huge portfolio but are very personalized.”
KBS has 12 U.S. staff members who work remotely and three full-time equivalent employees in India, all using XCM workflow software. To achieve that personalized service for their niche clientele, the team uses all-in-one distillery software suite Orchestrated Spirits. “The product incorporates production, operations and accounting, and is specifically geared towards the distillery industry,” Thieme explained. “Many of my colleagues choose to stick with a one-size-fits-all approach to accounting software, but at KBS CFO, I prefer to find the right fit, best fit solution.”
The same goes for all of KBS’s clients, who are offered a wide breadth of service offerings, ranging from fractional CFO to “full accounting department, where we’re paying bills, reconciling checkbooks, speaking with vendors, handling invoicing and payroll — all different components of what was once handled by a more classic accounting department.”
In addition to XCM and Orchestrated Spirits, KBS uses project-management software Front and Asana and internal communication tool Slack, all of which support Thieme’s no-email-between-staff policy (the team still uses it to communicate with clients). The collective automation power of all these tools helps KBS staff multitask, according to Thieme.
“Bookkeeping, accounting clerk, controller and a CFO role are all locked into one package,” she explained. “Outsourced solutions have skyrocketed in demand in part because of technology and in part because of how businesses start up now, delivering a superior solution than what was happening for a long time, depending on one person in a small business to fulfill all those roles ... Outsourced solutions provide the wide range of solutions businesses can afford.”
Parts of the process
Specifically, for liquor clients, Orchestrated Solutions manages the conversion of units going through the system as gallons become barrels, barrels turn into “proof gallons,” and finally result in cases of bottled spirits. “So, unit of measure conversion is huge in the distillery/fermentation business, and generalist-type accounting software products can’t really handle that level of sophistication,” Thieme said.
With the help of the software, KBS also advises on the other financial and logistical issues that arise in this niche market. “A unique element of accounting, is as it’s moving from tank to tank, barrel to case … the accounting systems need to reflect that, moving through the process, the production process. Accounting for distilleries, there are so many different components. You are taking the raw materials, labor and other costs, and replicating what’s happening — it turns into a really interesting liquid we like to consume.”
Another issue particular to the liquor and spirits industry is the level of loss at each of these stages of production, Thieme explained.
“One of the challenges is loss and waste,” she shared. “We were just working on this with the operations team for one client, where you are unfortunately looking at how much stock you had, then inevitably there is breakage, spillage and natural loss in the production process that has to be captured. It can be challenging to figure out. There is loss at the beginning of the process — you buy a bottle or barrel of booze, whiskey, and half evaporates before bottling because of environmental conditions. You lose money. Then there’s classic, literal theft. Cases of whiskey you are ready to fulfill that might walk out of the door with someone you trusted. It’s a classic distillery challenge we play a huge role in.”
On the record
KBS also guides these clients through a very regulated industry.
“Compliance is really challenging and onerous,” Thieme shared. “They have to tell the feds and the state how much whiskey was produced in a certain unit of measurement called proof gallons. They have to be able to stand behind that, pay taxes on that, and it can be very onerous on a business to calculate. They pull all spirits from raw materials and components, and they have to report to the authorities how much of that is put into barrels, how much of those barrels are packaged into cases. As easy as it sounds, it’s challenging for distilleries. If they don’t do it right, the alcohol control board will not license them to do what they’re doing. It’s a make-or-break thing for them. If they are just having a good time making whiskey, and not keeping a record, they’re not going to be in business long.”
The distillers that do thrive have an admirer in Thieme: “I gravitate toward people and organizations making things. A great industry within that is distilleries, because there are so many interesting things happening in that process. I find that fascinating.”
And as a consumer herself (her spirit of choice is rye), Thieme has always been intrigued by the bottles she passes in her local store.
“You see a label like my client in Lexington [James E. Pepper Distillery] ... you want to know their story and see how it all tastes. It’s part of what’s appealing and interesting to me — what’s that story that appeals to consumers. As a partner with these people, I’m really excited for their success. The story behind it is usually a struggle. And they are interesting people. In the distillery world, it’s a combination of chemistry and science, history and storytelling, and smart business. Having that full circle, all those elements, and then just the good taste. The fun of having a drink or two.”
At a glance
Firm KBS CFO
Headquarters Kensington, Maryland
Managing partner Robin Thieme
No. of staff 15
Year founded 2004
Services Accounting, outsourced CFO, business process restructuring
Industry specialties Craft distillery, e-commerce, manufacturing, government contracting