Bridging The Gap Between Winemaking and Accounting

When it comes to running a successful winery, the interplay between winemaking and accounting is crucial. Yet, these two worlds often feel like separate entities, speaking different languages. In a recent episode of Expert Talks, we sat down with Rachel Smith, owner and operator of Northwest Wine Accounting, to discuss how wineries can align their production and financial teams for better business outcomes.

Who Does What? Defining Roles

At the core of any winery’s financial operations is cost accounting and inventory management. Rachel emphasized that cost accounting consists of two main parts: calculating the cost of goods produced (bottle cost) and tracking the cost of goods sold (COGS) in the accounting system.

The winemaker and accountant work together, but their roles are distinct:

• Winemaking Teams track unit movements—how much wine is produced, bottled, and sold.
• Accountants assign financial values to those movements, ensuring accurate financial records and profitability tracking.

What Information Does Your Accountant Need?

To maintain accurate records, winemakers must provide their accountants with key data on bulk wine and bottled wine, including:

• Bulk Wine: Production volumes, purchases, bottling amounts, sales, and any unusual losses.
• Case Goods: Number of cases bottled, purchased (e.g., shiners), and depleted through sales, samples, or losses.

Much of this data aligns with the TTB 5120.17 Report of Operations, which can help accountants track wine movements accurately.

Assigning Costs: Who Inputs What?

Rachel highlighted that platforms like InnoVint allow winemakers to input critical costing details, such as:

• Grape invoices – linking costs to specific lots.
• Additives and dry goods – ensuring expenses like glass, corks, and labels are assigned correctly.
• Freight, pallet charges, and overhead costs – if not assigned directly, accountants allocate these as overhead.

While winemakers should input direct costs, accountants ensure everything reconciles with QuickBooks and capture missing expenses.

How Often Should Cost Accounting Be Done?

Rachel stressed that wineries should avoid waiting until year-end to conduct cost accounting. Instead, she recommends a monthly reconciliation process to:

1. Ensure financial records reflect accurate margins.
2. Avoid last-minute scrambles for missing data.
3. Provide up-to-date inventory values for lenders and business planning.

What Financial Deliverables Should Winery Owners Expect?

Key financial reports that wineries should receive include:

• Bottled cost per SKU at bottling time to guide pricing.
• COGS and gross margin breakdowns by sales channel.
• Inventory valuation for work-in-progress and case goods.
• Cash flow from inventory to track investments in production vs. sales revenue.
• Sell-through rates and run-out dates to optimize production and sales strategies.
• Break-even analysis to determine how many cases need to be sold to cover operating costs.

Resources for Winemakers and Accountants

Cost accounting is complex, and wineries should consider investing in tools and expertise to manage it effectively. Rachel recommends:

• InnoVint for tracking both juice flow and cost flow.
• Outsourced accounting firms specializing in wineries for expert reconciliation and reporting.
• Education programs like Sonoma State University’s cost accounting classes for deeper financial insights.

Final Thoughts

Bridging the gap between winemaking and accounting isn’t just about compliance—it’s about maximizing profitability and making informed business decisions. With the right systems, clear roles, and ongoing communication, wineries can build a financial strategy that supports both their craft and their bottom line.

For more information or to connect with Rachel Smith, visit Northwest Wine Accounting or email her at [email protected].

Stay tuned for more insights in upcoming episodes of Expert Talks!