Overhead costs (also referred to as soft costs or indirect costs) are the non-material costs associated with your wine's production that usually are capitalized across all or most of your cellar. While winery finance professionals might take different approaches to many aspects of winery accounting, they are consistent in their overarching best practice recommendations for applying these costs in InnoVint.
This article outlines some of those best practices.
Align InnoVint and Your Accounting Software
Overhead costs are most often entered by an accountant or bookkeeper, rather than those on the production team.
You or your accountant should decide how you'd like to map your chart of accounts from your accounting software, such as Quickbooks, to the cost categories in InnoVint, and you should stay consistent about how you use these categories across accounting periods.
For instance, you might choose to map multiple Quickbooks categories: Wages & Salaries, Payroll Taxes, Employee Benefits and Worker’s Comp all to the InnoVint cost category “Labor & Cellar”. Then, on a monthly basis in InnoVint, you would record an Add Cost action for the Labor & Cellar cost category in which all four of those QB categories are summed.
Simplicity for Overhead Cost Entry in InnoVint
In the wise words of one of our winery CFO friends, “Don’t be fancy”. Most winery finance professionals recommend applying your overhead costs across all the active wine lots in the period the overheads were incurred, unless a specific, significant cost needs to be applied to a particular lot. In general, the cost variations for overheads between lots will average out, so it is more operationally efficient not to be overly granular when applying overhead costs. In most cases, overheads are not applied to case goods and InnoVint is primarily used as the sub-ledger for the bulk wine component of your inventory.
The entry for each overhead cost category should be recorded for the month in which the costs occurred. However, depending on the size and complexity of your operation, you may only need to sit down for data entry a couple of times a year.
As a larger winery, you may do a hard close of your books on a monthly basis, requiring overheads be entered into InnoVint monthly and reconciled monthly.
If you are a smaller winery, on the other hand, you may not do a hard close until the end of a quarter, or the end of the year, meaning you can record your overhead cost data in InnoVint on a less frequent basis. Sit down every few months with the monthly cost category totals from your accounting software, and apply them to the relevant months using backdated cost entries (check out how to backdate cost actions here!).
Reconcile InnoVint with Your Accounting Software
It is best practice to reconcile InnoVint with your accounting software at least on a quarterly basis. Any variance between InnoVint and your accounting software should be reviewed.
Indirect cost entries can be reconciled using the Cost Item Report. This report can be filtered for a specific time period and exports as a CSV file, allowing for easy filtering of your cost categories to check for discrepancies.
In some cases, data entry into InnoVint may require correction by editing Add Cost actions or you may need to capitalize an adjustment (positive or negative) across the wine in inventory at the required point in time.