InnoVint's FINANCE product provides a powerful mechanism to enter production costs and track wine COGS. While winery business models may differ, from estate wineries to custom crush to négociant, we believe in one thing: if you enter accurate costs into InnoVint, you will be able to pull accurate COGS at the SKU level out of InnoVint. Here are the three basic tenants of doing so successfully.
1. Communicate! Decide who enters what - and how often
InnoVint is a winery operating system that can break down siloed information to help your business work better. Winemaking, viticulture, bottling, accounting and finance teams can all input and access data.
This means that communication between teams is key, especially for ensuring completeness of cost entries. Decide which teams are in charge of entering costs, what those costs are and how those costs will be entered (either as direct or indirect costs), and when those costs need to be recorded in the system.
Who?
Depending on the size of your winery, multiple people may be involved with entering the cost data that drives your winery COGS.
If you are a one person show - the answer is obvious - you will enter all direct and overhead data. Get some pointers on how small producers can achieve great COGS here!
If you (as an owner or winemaker) have an external accountant, a bookkeeper, or an internal accounting/finance team - then it is imperative to be on the same page.
- Who is in charge of fruit costs, and how are they entered? If the winemaking or viticulture team is in charge of fruit contracts, it maybe best to have them record this information. While final direct cost inputs may be reconciled by the bookkeeper or accountant, they can still be entered by others who are "closest" to that information.
- Is it better for your team to enter additives or packaging as direct costs, or indirect costs?
- If direct, who is in charge of entering an invoiced amount against the correct dry goods batch? This may be the production team, the procurement team, or someone else.
- If utilizing indirect costing for Dry Goods, especially additives, it may be best to leave these entries with the accountant, who can easily sum the total purchases for a month.
- Come up with a consistent plan (you don't want one team entering invoiced costs on additives that are allocated directly to lots, while at the same time, another user is capitalizing all additive purchases across bulk wines.)
- Who is in charge of collating and entering the overheads? Most often, this information lies with finance, an accounting team, or your bookkeeper, and may be best controlled and recorded by them.
What?
When you get started with cost entries into InnoVint, make a plan. Sit with your finance team (even if that's yourself!) and decide what materials should be tracked as direct costs, and how you will map your production overheads (any cost that contributes to making the wine - these may be in various GL accounts) from your banking or accounting software, into InnoVint's indirect cost categories.
For accurate COGS, it is imperative to account for all costs against your bulk wine inventory. It can sometimes be confusing which costs belong to production (and should accrue as your cost of goods sold) and which might be general business expenses. That’s why communication between accounting and winemaking is key from the start to create a clear and consistent system. We've created a starting checklist here for you to refer to.
When?
How frequently should you enter costs? Periodic costs that are capitalized across all inventory should be effective on a monthly basis.
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.
- If you have a hard monthly close of your accounting costs, sit down more frequently. After the prior month is closed, it is time to apply your (previously mapped) entries to the appropriate cost categories for that month. Then, consider applying a Cost Backdate lock to preserve your entries once the totals reconcile.
- If your accountant doesn't perform a hard close on a monthly basis, you have more flexibility to collate and record your cost data. Sit down every few months with the monthly cost category totals from your bookkeeper, and apply them to the relevant months using backdated cost entries. Reconcile after you enter costs to ensure that you are accurate and haven't missed any costs.
- Direct fruit costs can be set before or after harvest. These costs will flow through to previously processed juice/wines once they are entered and recalculated.
- Direct dry goods costs can also be entered or updated even after they are consumed via actions in InnoVint. If you are using direct costs, be sure that you have the whole picture for dry goods costs (the final invoice may include hazardous materials charges, shipping, pallet fees, etc). If you don't enter the entire invoice, your final InnoVint cost entries won't tie out with the books.
2. Keep it simple - capitalize your overheads
InnoVint is not intended to be a duplicative cost entry system where you enter each invoice as it is received.
For example, we know that running analysis can be expensive, and it all adds up. Winemakers often think that each analysis run on a lot needs to be costed to that specific wine. But, generally, most analysis costs are similar across lots (we can always worry about smoke taint panels or very special export panels separately), and as an overall percentage of the cost of making wine, capitalizing the entire monthly expense of running analyses across all bulk lots in inventory often makes the most sense. This means that each ETS invoice doesn't require data entry against specific lots. Just total up your analysis costs for the month (external labs, reagents, equipment maintenance), and spread that cost across the winery.
This advice holds true for most costs outside of Fruit and Packaging, including additives. Over the life of all of the wines in your cellar, these costs tend to average out. It is possible to take the time and specify cost application to specific lots, but this may take more time and effort than it is truly worth to you.
Most users find that they still get very accurate COGS for financial reporting, budgeting and bottle pricing by spreading costs widely. Find our article on how to simplify overhead entry here.
If you need more support to find a methodology that works for you, reach out to us at support@innovint.us
3. Reconcile on a regular basis
Based on our first best practice recommendation (Communicate!), we know that you've already decided how frequently to enter your indirect costs, and you have a good idea which costs should be making their way into your winery costing.
Along with entering these costs regularly (on whatever interval you are comfortable with), you need to consider regular reconciliations between InnoVint's cost inputs, and your actual accounting totals.
After your cost data entry for a given period, all of the charts of accounts that were mapped as costs of production have theoretically had their costs entered into InnoVint. Now, run a few reports to confirm that all of these costs are recorded accurately, and reporting as expected at the end of the period. Basically:
- The total inputs from your charts of accounts should be reflected in the relevant mapped cost categories. Try using the Fruit Cost Report to tie out your direct fruit costs, or export the Cost Item Report in order to confirm your direct cost entries. Depending on your winery's production workflows, the Roll Forward Report may also be a good option that totals all cost category inputs over a period of time (it will tie out by cost category, but not by lot).
- The total amount of monthly inputs should be reflected in the final on-hand lot cost at the end of the period versus the starting on-hand lot cost. Check out the Lot Cost Report for this, run at your starting and ending dates.
- Find out more about InnoVint's cost reporting here.
Reconciliation to tie out your books is key! If all the money you spent making the wine (per your books) isn't put into InnoVint and allocated to your lots, then the lot costs will not be accurate. If you don't know the final COGS on your wine/SKU then it can be hard to know if you are pricing your wine appropriately!