Sometimes you don't know what you're missing...
When calculating your true cost of goods, not including the all of the costs contributing to that final bottle will skew your assessment of profit margins. To help, we've built a checklist of items that generally contribute to the COGS for wine.
In some cases, you may need to work with your accountant or winery leadership in order to get the total costs for a period. Don’t worry if it takes a little while! You can backdate cost entries to the appropriate periods, and get updated costs on your wine lots as your costs become available to you.
Adding all your costs of production gets you well rounded and complete COGS for your bottled wine, straight out of InnoVint!
Read on for a list of costs that you should be considering when tracking your COGS in InnoVint:
1. Costs that can be applied as either direct or indirect cost items.
Fruit cost (or a bulk wine cost) must be added to each lot at least once. Dry goods (additives or packaging) costs may be added as direct costs, automatically applied as the dry goods are consumed, or as indirect costs added on a regular basis, such as when you capitalize all additive purchases across all bulk wine inventory.
Fruit (Grapes, Pears, Apples, Honey, etc)
If you fermented a raw material, and that raw material cost you money to procure, you'll need to include that cost. Find out how to enter fruit costs here.
Dry Goods
If you use additives (this can be yeast, nutrient, SO2, or other raw materials added to your wine) you need to account for the cost of those. Nearly everyone is going to package their product (and this may include bottles, labels, closures, boxes, tissue paper or wax). Check out this article to understand when and how to enter dry goods as a direct or indirect cost.
2. Costs that are applied as indirect items, on a periodic basis
These are period expenses that arise from making your wine, and can be described as soft costs, overhead, or indirect costs. Indirect costs can be added in InnoVint via the Add/Remove cost action - find out how here. Generally, these are costs that accrue monthly - while you don’t need to sit down for data entry every month, you do need to sit down every so often, to apply the backdated monthly costs for each tracked cost category.
Overheads
Do you rent your winery space? Pay utility or water bills? If it costs you money to run your winery, you should account for that in the production costs allocated across all the wine stored in your cellar. Review your relevant chart of accounts from Quickbooks, your banking statement or other accounting software, and consider lumping a group of them as an Overhead cost item in InnoVint.
Labor & Cellar
Somebody is working to make your wine. Is it you or a large team? The total payroll of the cellar should be factored into the cost of making wine.
Barrel depreciation
One of the largest cost centers on wine that is aged in oak. Make sure you allocate this cost to some or all of your wine, as necessary. Find out about ways to add oak costs here.
And more!
If you want to break your overhead down into smaller cost categories, review the available cost categories in InnoVint, and make a map. InnoVint provides a finite list of cost categories, including: Additions (Cost Item), Barrel Depreciation, Bulk Wine, Consulting, Custom Crush, Debt Interest, Equipment Depreciation, Freight, Fruit (Cost Item), Labor & Cellar, Lab Analysis, Overhead, Packaging (Cost Item), Storage, Vintage Crush, and Other.
You don't need to use all categories. But, having a clear and consistent map of your chart of accounts to specified InnoVint cost categories makes wrapping up monthly costs and entering them into InnoVint every month a quick and easy project.
3. Reconcile
The amount that you input into InnoVint should balance with the amount your accountant (or you!) put into Quickbooks (or paid out of your bank) in that same period to make and store bulk wine. Use InnoVint's costing reports to reconcile your inputs:
- Get the overall total lot value by cost category at a point in time (Lot Cost Report)
- Check total direct fruit cost inputs (Fruit Cost Report)
- Check your total cost category inputs (Cost Item Report)
- Review the final Bottled Costs removed from bulk wine inventory (Bottled Cost Report)
- Find costs added and removed from the winery for a period of time (try the Cost Over Time or Roll Forward Reports).
Does it seem like a lot? Keep in mind that these costs are adding to value of your inventory!