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As an owner-manager, one of the many challenges of operating a small or medium sized winery is getting your head around the accounting requirements. And while wine may be your passion, the myriad of accounting processes that go along with your business may not bring you as much enthusiasm.
Making wine is a manufacturing process. As a result, the cost of the process must be traced from raw materials inventories, to wine-in-production, to bottled wine and then charged to income in the period the wine is sold. In addition, direct overhead costs and the cost of production and storage equipment should be allocated to the process. The cost of the wine making process can be measured at varying levels of precision: by vintage year, by red or white, by individual varietal, or any combination of these. In general, the greater the level of precision you have, the more complex accounting system you need to track and capture costs.
Faced with this challenge, you might be tempted to ignore the issue of inventory and process costing altogether but there are several important reasons why these processes should not be overlooked:
The good news is that a carefully planned and implemented accounting system can make the accurate tracking of costs a straightforward process. Most accounting software packages on the market today can handle the basics. A qualified accountant and business advisor with a good working knowledge of the wine industry can help tailor a process costing system to meet your specific information and reporting needs.
Geoff McIntyre, CA is a Business Advisor with Meyers Norris Penny LLP. He can be reached at 250-763-8919 or [email protected]
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