This article is part one of a three-part series on the cost of goods sold—a key metric that can help wineries understand their profit margins. In this article we provide an overview of how to calculate the cost of goods sold (COGS) and why it matters. In the second article we dive into steps for setting up a system and best practices to derive this metric, and in the final article we discuss specific COGS insights for wineries by case volume. From the outset, Jason has kept the bookkeeping and compliance paperwork in house, eventually beginning to work with other wineries in 2021 due to his experience and expertise. He now works with nearly 20 wineries, mostly small operations, as an independent compliance agent. In 2024 Jason joined the team at Northwest Wine Accounting to further assist the wineries of the Pacific Northwest.
Wine Industry Finance & Accounting Certificate
- Wineries may choose to utilize other industry contacts or a CPA with wine industry experience to discuss the best approach for the situation.
- This article is part one of a three-part series on the cost of goods sold—a key metric that can help wineries understand their profit margins.
- Her expertise lies in the intricate realms of accounting, auditing, and financial reporting, with a specialized focus on the construction and wine industries.
- This article provides an overview of some of the wine industry’s unique characteristics that create special accounting, tax, and business risk considerations.
Winemaking costs vary considerably because of the variations in varietal production processes and aging requirements. Determining the applicable costs to include in inventory can be challenging, but tracking such costs is crucial for both proper winery management and proper tax reporting. Wine sales may be direct-to-consumer through tasting rooms or wine clubs, or to a third-party distributor. In any case, the winery needs to track when, what kind of, and to whom wine was sold, and to pay excise taxes to the appropriate taxing authority. States have different rules related to wine distribution and sales; most states require some variation of a three-tier distribution system made up of a winery, distributor, and retailer.
California Redemption Value (CRV) is here for all wineries!
If you want to spend your time doing what you do best, let the experts at Protea give you the luxury of not having to think about your books. The wine industries have to deal with heavy taxation and excise duties. These depend on the type of wine that is being manufactured, the content of alcohol in them, and their delivery destination.
Lowering production costs
She spent some time living in Wenatchee and teaching accounting at Wenatchee Valley College. She recently returned to Chattanooga, Tennessee, to be closer to family, but central Washington (and its wines!) will always have a special place in her heart. Wine Software manages a base set of easy to use features that translate into a fully accountable solution based on general accounting principles and best practices. Whether you are entering sales or adjusting Inventory, our “Retail Engine” manages the rules and keeps track of all the details.
QuickBooks will allow you to do this, as well as most other financial reporting platforms including Fathom, which is the platform we use for performance reporting with our clients. You could dump all your revenue into winery accounting one account called “Sales” and call it good. This might be adequate for tax purposes, but it is fairly useless when you are trying to compare how your tasting room is doing compared to your wholesale channels.
Wine Costing & Inventory Support
- And two of the most common places we see errors in data are in cost accounting and the tracking of the Cost of Goods Sold (COGS).
- Adding to the challenge is the fact that it’s hard to find information on best practices around these things.
- Changes to tax code in 2017 now allow expensing for many winemaking costs and therefore creating greater disparity between U.S.
- Contact Protea Financial today to learn more about our services and how we can help you run your business more efficiently.
- We fall into a regular cadence of weekly bookkeeping, monthly reporting, and quarterly check-ins.
- Whether you need assistance setting up your books or preparing for tax season, we can help you navigate the complexities of the wine business.
- Understanding the winemaking process is necessary to appreciate the industry’s unique accounting, tax, and business risk issues.
This section of the financial statements contains everything you own, as opposed to the liabilities section which contains everything you owe. Sometimes the accounts you need will be dictated by your business structure. For example, an S- Corp will have an account for the owner’s salary, which you wouldn’t have in an LLC. In a partnership, you might have accounts for Guaranteed Payments, which you would not have in another structure.
By tracking your investment and usage in these aspects of production, you form an accurate idea of the cost for the wines you sell. Course DescriptionThe operations of a vineyard or winery present unique issues for the accountant that require alterations to its chart of accounts, costing system, and many of its procedures. In short, this course is an essential desk reference for anyone engaged https://www.bookstime.com/ in the accounting for a vineyard or winery. Production costs should be allocated to the various bulk wine in the cellar based on the type of processing activity and the stage of the wine in the process. Crush and ferment costs, which may include payroll, supplies, allocated overhead, and depreciation or rent related to crush equipment, should only be allocated to the current vintage crushed.
School of Business & Economics
Hiromi Young is a seasoned financial advisor and accountant, boasting over two decades of proficiency in public accounting. Her expertise lies in the intricate realms of accounting, auditing, and financial reporting, with a specialized focus on the construction and wine industries. Hiromi’s professional journey reflects a passionate commitment to her clients, demonstrated through her hands-on approach in addressing their accounting and financial reporting needs.