This way, everyone works together efficiently, reducing waste and taking advantage of opportunities for growth and profitability. Now, let’s relate this to the precise tracking of the Cost of Goods Sold winery accounting (COGS). These costs need to be properly distributed to determine the actual cost of goods. Adding to the challenge is the fact that it’s hard to find information on best practices around these things.

Protea Financial’s Wine Accounting Services

As another example, we keep venue rental separate from other event income, as it is taxed differently by the Washington Department of Revenue. There are a few places in the chart of accounts, where we like to add additional accounts to keep track of details that we will need at tax time. Protecting against raw materials fraud can be challenging, but being aware of the possible types of frauds possible is a good start. The best internal control is to only do business with reliable and known suppliers and to have a contractual arrangement that allows for retribution if lower quality or mislabeled goods are provided. Employees and nonemployees alike should be trained about the benefits of sharing information about any irregularities of which they are aware. Given the high dollar value of many bottles of wine, it is not a surprise that many asset misappropriation schemes in the wine industry involve inventory theft.

Inaccurate Cost Accounting & Cost Tracking

We fall into a regular cadence of weekly bookkeeping, monthly reporting, and quarterly check-ins. We are here to help you see your story and move forward with insight and understanding, so you can build your winery business into what it was meant to be. Our team of winery accountants are focused https://www.bookstime.com/ exclusively on helping small wineries thrive. Their outstanding team works fast and has the soft skills needed in this business, and their efficiency and attention to detail mean I can relax and do what I love. These are known as COGS (cost of goods sold) and COGP (cost of goods produced).

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One common challenge we see for wineries is not recording enough details during financial transactions. This typically starts at the basic transaction level, where important information about costs and quantities often gets overlooked. When it comes to managing finances in the winemaking business, accurate accounting is vital. The manufacturing and production elements of the industry are very nuanced. But the accounting for the long production cycle is also very complicated and nuanced.

This methodology offers the benefit of being measurable and verifiable based on usage. If the production facility uses considerably more of the utilities than other portions of the facility, the allocation percentage can be adjusted. In order for a winery to use LIFO for tax purposes, it is also required to use it for financial reporting purposes. Typically, wineries utilizing LIFO initially utilize SPID or FIFO for internal, managerial accounting purposes and record a LIFO reserve to adjust to LIFO for financial reporting and tax purposes. In this article, we’ll break down how to obtain the information you need to understand your profits and costs—including relevant accounting basics and strategies to categorize various production costs. We are the premium wine industry CPA firm offering a full range of services including advisory, accounting, tax, compliance and assurance services.

• Financial reporting operates under GAAP guidelines and allows your company to remain compliant with policy boards.
• While some may argue for expensing production costs for tax benefits, it’s vital to maintain a separate accounting set for management purposes following Generally Accepted Accounting Principles (GAAP).
• One of the major accounting complications faced by wineries is extensive regulatory compliance (and its changes).
• In 2023, Books on Point made the commitment to focus exclusively on wineries and rebranded as Northwest Wine Accounting.

Compliance with Numerous Regulations