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Why You Should Hire a Bookkeeper

Why You Should Hire a Bookkeeper

Running a successful winery requires you to manage numerous departments—production, processing, sales, and administration, to name a few. Often bookkeeping and accounting are some of the first areas neglected when there’s not enough of you to go around.

When you find yourself scrambling at tax time or with a pile of unopened bills, hiring a bookkeeper can help ease your burden. With a professional in charge of your day-to-day finances, you’re free to tend to the areas of your winery that need your expertise.

 

A Bookkeeper Will Allow You to Focus on Your Business

 

Great bookkeeping is the backbone of any successful business. Ensuring your bills and employees are paid on time, your taxes are filed, and your financial statements are current are just some of the things a great bookkeeper does.

While you may think that doing your own bookkeeping saves you money and allows you to better understand your business’s finances, every bit of time you spend crunching numbers is time away from building, managing, or expanding your business.

You didn’t get into the winery business because you enjoy accounting and administrative work. Your time is better spent working on producing wine.

Bringing in a professional to help with your bookkeeping can prevent you from being spread too thin and burnout. Stay focused on what you really love doing and leave it to the financial expert to handle the numbers.

 

A Bookkeeper Will Help You Better Understand Your Business

 

You know a lot about wine grapes, harvesting, and selling wine. Chances are you aren’t a skilled accountant.

You may know how much your grapes cost but do you know you receive a 10% discount if you pay your vendor a few days early? A bookkeeper will help you manage cash flow to ensure your business takes advantage of any money-saving opportunities.

As your winery grows, knowing how much cash you have in the bank isn’t enough. You’ll need to know how much money you have coming in and going out in the future. Keeping track of it in your head can lead to cash flow struggles.

A great bookkeeper will manage your accounts receivable and accounts payable to keep cash moving.

Having a bookkeeper who’s devoted to your winery’s books allows them to be able to spot irregularities early. Maybe a vendor is charging more or you are selling more than in the past, but you aren’t  collecting more sales tax. Addressing any inconsistencies from the start will save money and time in the long run.

An experienced bookkeeper can help streamline procedures too. They can help standardize how documents are retained or create a calendar to manage due dates of bills.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

A Bookkeeper Will Help Keep Your Business Compliant

 

Taxes come in many shapes and sizes. Federal payroll and excise taxes. State payroll and income taxes. Sales taxes and business licensing.

Bookkeepers excel at organizing, recording, and filing. Experienced winery bookkeepers know the ins and outs of the various taxes your winery will need to pay. They will ensure processes are in place so that your taxes are filed and paid on time, preventing you from incurring penalties and reducing your anxiety.

State regulations govern the winery industry. Keeping on top of your winegrower’s license, wholesaler license, and your on or off-premise retail license is another area an experience bookkeeper can assist. They can ensure your licenses are renewed before they expire and can provide any necessary reports. 

If you have loan covenants to maintain or investor reporting to prepare, an experienced bookkeeper can manage this to ensure you don’t miss a deadline.

With a dedicated bookkeeper, year-end tax time can be less stressful. Your bookkeeper has kept your financial house in order throughout the year. This makes it easy to hand over your tax records to your tax professional.

 

A Bookkeeper Can Save Your Business Money

 

In addition to the compliance aspect of tax time, your bookkeeper is probably less expensive than your tax professional. Having a bookkeeper on staff who timely records your transactions decreases the amount of work your accountant has to do to prepare your tax return.

A high-quality, experienced bookkeeper will have a general idea of how much things costs. While they may not know specifics about the winery industry, they will know prices for office supplies, telephone service, and bank fees. This wealth of knowledge will prevent you from paying more than you should.

A bookkeeper will ensure your bills are paid on time so you avoid late payment fees or interest. These unnecessary expenses reduce your profits and may harm your business’s credit score.

Bookkeepers can also monitor your budget. They can provide reports comparing your budget with actual expenditures and will be able to zero in on any differences. With enough experience with your winery, they can also assist in developing future years’ budgets.

Even if you’re just starting on your business journey, hiring a bookkeeper early will prevent the stress and struggle that comes from DIY bookkeeping. And those further along the business path, now’s the time to consider the benefits a bookkeeper can provide.

Whether you’re looking to hire a bookkeeper as an employee or outsource it, having a professional in your corner makes sense. You’ll be able to focus on taking your winery to new heights.   

Why You Should Hire a Bookkeeper

Running a successful winery requires you to manage numerous departments—production, processing, sales, and administration, to name a few. Often bookkeeping and accounting are some of the first areas neglected when there's not enough of you to go around. When you find...

Financial Forecasting and Cash Flow Planning

While extremely rewarding, getting a winery up and running can be very difficult to do. Not only does it require a large amount of capital and resources to start with, but you also won’t even start selling wine until a few years down the line. It’s a large investment...

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Small Producers Tax Credits for Everyone!

Small Producers Tax Credits for Everyone!

‘Small Producers Tax Credits for Everyone!’ (Said in my best globally famous talk show host voice.)

So you’ve heard that the Craft Beverage Modernization Act was made permanent. And you operate a winery or you support operational reporting for a winery.  Now what?

 

Let’s Begin at the Beginning – Tax Class for Still Wine

Before you can figure out how to take a tax credit, you need to check the tax class.  The rates of tax for still wine can be found in 26 U.S. Code SECTION 5041 (c) or by clicking here if you really want to read tax code.  Effective January 1, 2021, still wine that is not more than 16% alcohol by volume (‘ABV’) is taxed at $1.07USD per gallon and still wine between 16% ABV and not more than 21% ABV is taxed at $1.57USD per gallon.  That means that while the tax rate has not changed, the ABV for still wines in a specific tax class did change.

If you produce still wine and you have removed it tax paid from the winery’s bond, the excise taxes owed are based on the rates listed above.  Still wine that is transferred from the winery’s bond to another bond (typically for storage or order fulfillment) and tax paid later is still eligible for the tax credit.  In short, if you pay tax on still wine of your own production you are eligible for the tax credit described below.

 

Side Note – Labelling Rules

TTB labeling rules for listing the ABV on wine labels did not change.  I received questions about this over the past two years and the listing requirements along with permitted tolerances, can be found HERE.

 

Tax Credit?  What Tax Credit?

Effective January 1, 2021, among other changes, the words ‘For Small Domestic Producers’ is removed from that same 26 U.S. Code SECTION 5041(c) mentioned above. This permanently establishes that the following tax credits are available to all wine producers and importers:

  • $1.00USD/gallon on the first 30,000 gallons produced in the United States or imported into the United States in a single calendar year
  • $.90USD/gallon on the next 100,000 gallons
  • $.535USD/gallon on the next 620,000 gallons

Up to 750,000 gallons of wine are eligible for some form of tax credit in a single calendar year.  Note that while the tax class changes only applied to still wine, the tax credits apply to all types of wine.

Excise Tax Class? Check.  Tax Credit? Check.  Where Do I Claim the Credit?

Before you can claim the tax credits listed above, you need to first tell the Tobacco Tax and Trade Bureau (‘TTB’) that you have removed the wine from bond to tax paid status.  If you work on the winemaking side of the business or support winery operations, you’ve probably heard the terms ‘702’ or ‘5120’, depending on your vintage in the industry.  Those terms apply to the TTB Report of Wine Premises Operations, found HERE on the TTB’s website. This report is where a wine producer declares how much wine they have produced, what winemaking activity (including bottling) occurs and, among other things, what wine is removed from bond during a given reporting period.  (Reporting periods vary based on production volume.) Just in case you’ve looked up the form and you’ve never filled one of these out before, there are two rows on the form where you list wine removed tax paid – Section A (Bulk Wines) on row 14 and Section B (Bottled Wines) row eight. Both rows have multiple cell options depending on the tax class and type of wine or hard cider that was removed, but those rows are where you specify what has been removed tax paid. Once wine has been reported as ‘removed taxpaid’, excise tax is owed on that wine.  After the operations report is filed, it is time to file and pay the excise tax for the wine removed from bond along with claiming available tax credits.

The TTB Excise Tax Return or TTB F 5000.24sm, is where you declare the taxes you owe and credits allowed.

 

Updated Forms Available

There are now forms available for winemaking activity prior to January 1, 2018 and activity from January 1, 2018 to present.  You can find the most common TTB forms HERE.

 

A Permanent Tax Credit is Not a Change in Tax Rate

Making these two changes permanent is great news for producers large and small.  What needs to be clear is that these are two different changes – one to the up to 16% ABV tax rate and the other allowing all producers to claim a tax credit that had previously been reserved for small producers.  While the net impact may be a reduction in taxes paid, it is not a reduction in a tax rate across the board.

For anyone who has read the relevant section of the 5,000 plus page document where these changes were made permanent, you will notice something missing from this post.  This post is directed at domestic wine producers and does not explain how it may apply to importers of wine in the United States.

 

Need More Information?

Cronbach Law Group PC is a law firm located in Napa, California.  Our focus is helping our clients understand the complex world of alcoholic beverage regulation –  50 states, 51 sets of rules. Let us be your guide and keep your busines priorities top of mind on along the way.  www.winedeal.law

 

 

 

 

Thank You From Protea Financial: This Is Just the Beginning

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Small Producers Tax Credits for Everyone!

‘Small Producers Tax Credits for Everyone!’ (Said in my best globally famous talk show host voice.) So you’ve heard that the Craft Beverage Modernization Act was made permanent. And you operate a winery or you support operational reporting for a winery.  Now what?...

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While extremely rewarding, getting a winery up and running can be very difficult to do. Not only does it require a large amount of capital and resources to start with, but you also won’t even start selling wine until a few years down the line. It’s a large investment...

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The state of the Property insurance market for wineries is experiencing some severe difficulties and there is no relief in sight for the foreseeable future.  We are experiencing what the insurance industry calls a Hard Insurance Market.  It is hard to get to coverage...

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How to Calculate the Cost of Making Wine

How to Calculate the Cost of Making Wine

To run a profitable winery, it is vital to understand how much profit you are making per bottle of wine sold. You will need to be able to determine and understand what you can sell your wine for and how much that wine costs to produce.

While the market will dictate how much you charge for your wine, you control how much it costs to make it, as long as you understand what is included in the costs and have a mechanism to track it.

An accurate calculation of the costs to make your wine increases the likelihood of operating a profitable winery. Although this sounds like a simple endeavor, there are challenges. From determining which costs to include, to tracking all expenses through the production process, getting to a final dollar value takes time and careful consideration.

The Basic Terminology

Before we can start discussing how to value your winery inventory, let’s define two key accounting terms.

Cost of Goods Produced (COGP) 

Commonly known as wine in process or cost of inventory, all costs involved in the process of making wine are included. This includes things like:

Raw materials
• Services
• Labor
Overhead allocations

Whether direct or indirect, all costs from planting through to bottling the finished wine are included in COGP.

Cost of Goods Sold (COGS)

The COGS is the cost of the wine sold in a specific period. You’ll need to match the cost of the inventory you sold to your revenue. A simple way to put it, for each bottle of wine sold, how much did it cost to make and get it into the hands of the customer.

Now that you understand the two primary accounting terms related to production, we need to dig deeper into the different ways to develop a value for your COGP, starting with the groups of costs involved.

Inventory Costs

Winemaking generally involves three main types of costs.

Direct materials
Direct labor
• Overhead allocations

Direct Materials in Winemaking

Calculating materials cost is reasonably straightforward. It is the cost, including tax and delivery fees, to acquire your materials and get them to your production area. This includes raw materials like grapes and packaging materials like bottles and boxes.

Segregating these costs makes the allocation of overhead (which we’ll discuss a little later) a little easier and more accurate. And it makes sense for blended wines. You’ll be better able to track the component costs.

While you may initially record the cost of grapes separately (if you are farming, this will be more complex than if you are buying grapes), it will be added to the other expenses, such as fermentation and cellar costs, to get to your bulk wine cost.

Direct materials don’t include materials consumed in production. For example, light bulbs or air filters in your production facility are manufacturing overhead.

Labor in Winemaking

Labor required to turn your raw grapes into a finished bottle of wine should be included in inventory costs. You’ll want to include not only salary and wages but also benefits and payroll taxes.

Owner or executive compensation is difficult to classify. While they are involved in the winemaking process, they also work in other areas, like administration and finance. For these individuals, determine how much of their time is involved in the winemaking process and apply the percentage to their total payroll costs. Using reasonable estimates is acceptable.

Overhead in Winemaking

Costs incurred to keep your winery operating but aren’t direct materials or labor are overhead. Overhead costs are usually aggregated into cost pools and allocated based upon the number of bottles produced.

Examples of overhead include property insurance and taxes, building repairs and maintenance, utilities, and administrative staff wages.

With your bulk wine value, adding expenses for your direct labor and overhead gets you to the total cost of the finished, ready-to-sell wine.

After you’ve tabulated the total inventory costs, you’ll need to consider how your wine inventory moves. This cost-flow is your inventory valuation method and impacts your COGS, income taxes, and balance sheet ratios for lending requirements. Choose the other that best suits your production process.

COGP/Inventory Valuation Methods

Specific Identification

This method involves tracking each item from the time of purchase through to when the wine is bottled. Meticulous record-keeping, data collection, and data segregation make specific identification highly accurate.

Starting with the calculation of exact juice or wine yields for each varietal vintage, even getting detailed down to which vineyard or vineyard block, you then track the juice into the individual barrels for each lot, parsing and combining as barrels get blended.

Weighted or Average Cost

When costs are intermingled and difficult to specifically identify, using the average cost method may work best. Using the average or weighted average for consumable supplies like yeast and sulfur or general costs like storage is appropriate.

First-In First-Out (FIFO)

Another valuation method is the FIFO method, which assumes that inventory moves such that the oldest stock (the first in) is the first sold (the first out).

Last-In First-Out (LIFO)

As you might guess, the LIFO method assumes the newest inventory items (the last in) are the first to be sold (the first out). This is unlikely the case in the wine industry since older vintages are typically sold before newer ones.

Specific identification and FIFO are the most commonly used valuation methods for wineries.

Using LIFO for tax purposes requires you to use it for financial reporting purposes. This can be achieved while still using the specific identification or FIFO method by recording a LIFO reserve on your books.

Recent changes in the tax code for expensing of certain winemaking costs make consulting with your CPA very helpful.

Regardless of which inventory valuation method you use, use it consistently. Consistency is required for U.S. GAAP reporting and makes spotting an error easier.

Valuing winery inventory is challenging and unique. It requires specialized knowledge acquired through years of experience. The professionals at Protea have decades of experience helping winery owners with complex accounting and tax issues. Reach out today to see how we can help you.

The Property Insurance Marketplace for Wineries

The Property Insurance Marketplace for Wineries

The state of the Property insurance market for wineries is experiencing some severe difficulties and there is no relief in sight for the foreseeable future.  We are experiencing what the insurance industry calls a Hard Insurance Market.  It is hard to get to coverage and hard to tolerate the coverage reductions, lack of available insurance limits and increased prices.

“For the larger wineries, it is extremely difficult to purchase enough limits of insurance to adequately cover all of the exposures to loss of buildings, machinery and equipment, inventory and business income in the event of a loss.”

How did we get here and why is this happening?  It started in California with the 2017 fires followed by the 2018 floods and then the 2019 fires.  Insurers took substantial fire losses in 2017, an extremely large flood loss in Northern California and bourbon plant fire in Kentucky in 2018 followed by large fire losses in 2019.  These compounded losses caused several insurers to withdraw their interest in the wine industry altogether while others have dramatically reduced the coverage offerings available while substantially increasing rates / prices.  

A winery was previously able to be able to purchase an extremely broad Property coverage through what is called a Stock Throughput policy which was offered by Lloyd’s of London syndicates.  This form has been dramatically modified to reduce the insurance coverage offered.  A Lloyd’s syndicate is still looking to offer Property insurance, however primarily to the largest of the large wineries.  There have recently been new insurer entrants into the marketplace, while their true interest in offering terms is yet to be fully determined.  

For the larger wineries, it is extremely difficult to purchase enough limits of insurance to adequately cover all of the exposures to loss of buildings, machinery and equipment, inventory and business income in the event of a loss.  Previous to 2018-2019, limits of liability of 100’s of millions of dollars were readily available.  Today, it is a laborious process to layer enough limits in order to build an adequate insurance program to cover the full exposure to loss or damage.  Oftentimes loss limits or stop loss limits of insurance protection are purchased to cover the largest foreseeable loss at a single location.  Increased property deductibles are also being required in order to obtain coverage.  However, the fires have shown us that there is no easy way to determine what could possibly be lost, damaged or destroyed so insuring to 100% replacement value is a good practice to employ.  Building replacement costs have gone up dramatically and a true assessment of the true current replacement cost is essential.  

What can you do?  Work with your finance team, CPA, banker and insurance broker to determine accurate values to substantiate the limits of liability you are desiring to purchase.  Know the true replacement value of your buildings, machinery and equipment.  Insurers are oftentimes asking for limits equal to 100% of replacement cost, in lieu of previously allowed lower limits of insurance.  Have a firm understanding of your stock valuation for inventory in all phases of production, from fruit just picked to and through the entire process of bottling and warehousing finished inventory.  In advance of approaching the insurance marketplace, have all of your information professionally and concisely documented.  

There is currently no relief in sight for property insurance in the wine industry.  What used to be a relatively easy process for an insurance brokerage to approach the insurer marketplace now is a process that requires oftentimes several months.  By working 120 or more days in advance of a property insurance renewal, unexpected requests by the insurers and delays in getting physical inspections and additional details of insured locations may be avoided.  It is important to work with a team of individuals and firms that understand the wine industry and have strong relationships within the insurer marketplace.  Patience and frequent communication are key to a successful property insurance placement.

What inext? If your current insurance brokerage is currently working with wineries, you may be in good shape as they should be familiar with the scenarios above.  If they do not, ask your other professional relationships such as CPA or banker who they would recommend that work in the wine space.  Reach out to your friends and colleagues at other wineries your size and ask how their renewal process is going/went and who they are using.  Local “business journal” type of publications have lists of property and casualty insurance brokers in the wine space.  Protea Financial team also have insurance brokerage relationships they will introduce you to or contact Chet Laws of InterWest Insurance at claws@iwins.com / 707-657-4505.

 

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Financial Forecasting and Cash Flow Planning

While extremely rewarding, getting a winery up and running can be very difficult to do. Not only does it require a large amount of capital and resources to start with, but you also won’t even start selling wine until a few years down the line. It’s a large investment...

Why You Should Hire a Bookkeeper

Running a successful winery requires you to manage numerous departments—production, processing, sales, and administration, to name a few. Often bookkeeping and accounting are some of the first areas neglected when there's not enough of you to go around. When you find...

Protea Conversations: Nastassia Lopez

Protea Financial was founded in 2014 to provide high-quality out-sourced accounting at an affordable price.  Given Protea’s flexible work environment, the Company especially appealed to accountants who wanted to re-enter the workforce after taking time off to start a...

Bookkeeping Basics for Small Business – Why Bookkeeping Matters

Few of us like to think about bookkeeping and accounting. Without it though, you’ll find yourself in the dark about how your winery is performing. Bookkeeping is the backbone of all businesses. To know what’s happening at the most basic financial level, you’ll need to...

Protea Conversations: Suzanne Briel

Protea Financial was founded in 2014 to provide high-quality out-sourced accounting at an affordable price.  Given Protea’s flexible work environment, the Company especially appealed to accountants who wanted to re-enter the workforce after taking time off to start a...

Thank You From Protea Financial: This Is Just the Beginning

This is truly a surreal moment for us here at Protea Financial as we celebrate our seventh year in business. What started out as a mere extension of a business has since morphed and grown into something much bigger - the dream of better accounting for everyone. The...

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The primary difference between these two is the timing of when transactions get recorded.

Small Producers Tax Credits for Everyone!

‘Small Producers Tax Credits for Everyone!’ (Said in my best globally famous talk show host voice.) So you’ve heard that the Craft Beverage Modernization Act was made permanent. And you operate a winery or you support operational reporting for a winery.  Now what?...

How to Calculate the Cost of Making Wine

To run a profitable winery, it is vital to understand how much profit you are making per bottle of wine sold. You will need to be able to determine and understand what you can sell your wine for and how much that wine costs to produce. While the market will dictate...

The Property Insurance Marketplace for Wineries

The state of the Property insurance market for wineries is experiencing some severe difficulties and there is no relief in sight for the foreseeable future.  We are experiencing what the insurance industry calls a Hard Insurance Market.  It is hard to get to coverage...

Businesses Need to Do These Four Things Before 2021

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Preparing Your Winery for Natural Disasters

Preparing Your Winery for Natural Disasters

It’s been a tough summer. First, the COVID pandemic slowed down commerce, and most recently the massive wildfires are burning throughout Northern California. This year’s fires came earlier than they historically have and this early arrival means grape harvesting is caught in the crossfire. 

Many winery owners are rightfully nervous about what the future holds and are thinking about what they can do to protect their business. Fortunately, the government has stepped in to help businesses impacted by the wildfires and there are numerous action steps you can take today to help prepare you and your business for future natural disasters.

Extended Tax Deadlines

The IRS recently granted some relief to taxpayers impacted by the California wildfires.  It extended the filing deadline for all tax returns and payments that were due starting on August 14 through December 15. The new deadline for these returns and payments is December 15. The California Franchise Tax Board followed suit and issued a similar extension.

So, C-corporations that timely filed for an extension to file their annual tax return would have had to file by October 15. The new deadline is now December 15.

Likewise, S-corps, partnerships, and sole proprietors would have had to file by September 15 but now have until December 15 to do so.

Any estimated income tax payments that would have been due on September 15 are now bumped back until December 15.

Those 3rd quarter payroll tax returns and any payment that would have been due on October 31 are now due by December 15.

If your county has been declared a federal disaster area by FEMA, you will receive this automatic extension. This new extended deadline is automatically applied by the IRS and there is no need to file any paperwork.  As of September 2020, FEMA has declared the following counties federal disaster areas: Sonoma, Napa, Lake, Yolo, Butte, Solano, San Mateo, Santa Cruz, and Monterey.

All penalties and interest will be waived so long as you file all your returns and pay all your tax by December 15. 

Disasters and Insurance

Most wineries have multiple layers of insurance protection. Property, business interruption, and viticulture policies just to name a few. 

Now might be that time you need to make use of your insurance. If you’ve suffered damage from the wildfires, contact your insurance agent right away. Many property insurance policies cover natural disasters like wildfires. And some policies will cover a portion of lost revenue and increased expenses due to business interruptions.

Reviewing your insurance needs should be a regular occurrence. And if you haven’t had that conversation with your agent in a while, now is a good time. Talk through all your business needs to craft the coverage that’s right for your winery. 

Disaster Preparation

It’s never a fun topic to discuss but disaster preparation and plans should be an important part of your winery’s business strategy. With a proper plan and early preparation, you can lessen the chance of being negatively impacted by a natural disaster.

Regular Maintenance Is a Must

Winery owners should make sure their property is in the best possible shape to withstand any natural disaster. Repairs and maintenance should be made regularly, including clearing fallen debris and removing dead or dying landscaping. 

Create a Continuity Plan

Have a plan in place to communicate with winery staff in the event of an emergency. Create a contact list with all employee’s names and phone numbers and establish procedures about how communication will happen in the event of a disaster. Don’t forget to consider how you’ll communicate with customers and suppliers. 

Have a point person at your winery who is responsible for monitoring natural disasters. This person should have clear authority to make decisions about the safety of your crop, inventory, and staff. 

Ensure your plan includes how you’ll protect your equipment, buildings, and inventory.

Protect Your Electronic Data

With so much of your business data stored electronically, be sure that it’s backed up regularly. The backup should happen off-site so that in the event your computers and servers are damaged, you’ll still have access to all your records.

If you’ve been hesitant to use the cloud to store your data, consider making the switch. Most cloud storage providers make multiple backups each day and access is easy from anywhere you have an internet connection. Cloud storage could help your employees to continue working even if your winery has been evacuated or damaged from a natural disaster.

Document, Document, Document.

Keep thorough and complete records of all your business assets and keeping pictures of all your assets will help if you have to make a claim to your insurance carrier. 

You’ll want to document:

  1. The type of asset, including model number and serial number, if applicable
  2. The year it was placed in service
  3. The price you paid for it
  4. Any customizations made to the asset

A good place to start would be using a fixed asset schedule or report. If you don’t keep this schedule, your tax accountant should have a copy. 

Keep in mind all your assets might not be on the fixed asset schedule. Inexpensive equipment like computers or office furniture may not be on the fixed asset schedule, but you’ll want to keep track of those, too. 

Managing and Protecting Inventory Before a Disaster

Inventory is one of the largest assets a winery owns. With a robust inventory management system, you’ll know exactly what you have, and protecting your inventory from a natural disaster should be included in your contingency plan. 

Your wine racks should be sturdy enough to withstand the shaking of an earthquake or strong winds from storms and your wine inventory should be well organized and labeled correctly. 

Keeping your inventory system up to date and organized will be helpful in the event you need to file an insurance claim. 

Your inventory management system should know the exact dollar value of all your inventory at any given moment.  And if you hold a large amount of inventory, ensure your insurance policy covers all of it.  A report with your costs and quantities can be created quickly.

If your business has been affected by the wildfires in California or you could use a helping hand with your business strategy or accounting, get in touch with Protea now.  Our professionals are experts at bookkeeping for wineries and work tirelessly to ensure your financial goals are met. Learn how outsourced accounting and bookkeeping can save your winery time and money. 

Why Customer Retention is Imperative For a Winery

Why Customer Retention is Imperative For a Winery

The primary goal of many wineries is to develop, cultivate and produce products that promote repeat business and retain customers. Wineries exist to satisfy customers’ needs through products or services and it’s important for a winery to retain these customers. Since we operate in a competitive business environment, it is important to identify how we can increase customer retention levels.

Let us first define customer retention:

Customer retention is a combination of intentional repurchase behaviour and psychological attachment of a customer to a particular product or service (Al-Hawari 2005:231; Peelen 2005:239; Godson 2009:72; Cant & van Heerden 2010:444). McManus and Guilding (2008:779) also define customer retention as an attitude where a customer’s attachment to a product, service, brand or company is developed. According to Zhang, Dixit and Friedmann (2010:128), customer retention is the likelihood of a customer choosing a particular brand with reference to his/her past purchases.

Why is customer retention important?

Retaining existing customers is cheaper than acquiring new customers.

By retaining customers it allows a winery to generate more profits with each additional year of the customer-relationship. Research has shown that 12 – 15% of customers are loyal to a single retailer, but these customers represent 55 – 70% of total sales, and the only way to increase customer retention is to increase customer satisfaction. Satisfied customers have the tendency to return to the same store and they end up buying the same product.

What happens when customers are dissatisfied? The negative aspect of customer dissatisfaction is that customers lower their expectations when buying from the same winery or stop buying from the winery completely.  Conversely, customers that are satisfied have the tendency to return and possibly refer new customers to your winery. As a result, the winery increases its customer retention and lowers customer acquisition costs, which in turn increases the profit of the business. One of the focal points of a winery should be on customer satisfaction as it can possibly yield greater profitability than customer acquisition strategies.

The question then remains, how to satisfy customers and develop a winning customer retention strategy?

Provide quality products

Quality is more than just producing a quality product. The quality of a product should be customer-driven. What is the customer looking for exactly and how do they define quality? It all comes down to how the customer experiences the product. It is important to note that the higher the quality of the product, the more likely a customer will be satisfied. Quality is also not something that you can improve overnight. Take for example the comparison of wine produced in the early 19th century to today’s wine. The use of modern-day technology, a variety of cultivars, viticulture, and overall winemaking experience allows us to produce outstanding quality wine. It takes time to design and build a quality product from the ground up.

Customer service

Customer service is intricately associated with good quality products. It is important to respond timely to the disgruntled customer and resolve their issue promptly. Customer service is one variable that you can easily control and oversee. Implement standardized service response systems that can deal with inquiries and complaints promptly. These response systems and remedial actions are vital to realize increased levels of customer satisfaction. Your ultimate goal should be to decrease your customer service queries, this in turn evidences that you are producing a quality product. An investment in quality and perfecting your product will reduce your need to deal with customer complaints.

Training and preparation are key

“He who fails to plan is planning to fail!” – Sir Winston Churchill.

It is important to train employees and convey to them that customers are the ultimate judge of quality. Provide employees with a detailed guideline and proper training on how to deal with disgruntled customers. This is especially important as these employees will be representing the brand and they have a big influence on how a customer can perceive the brand. It is important to listen to what the customer is complaining about and utilize this information constructively to improve the overall quality of your product.

Build a relationship of trust with the customer

When a customer trusts the product, the quality, and the brand, they tend to share their experience with family and friends. A case study by Nielsen found that 92 percent of people trust recommendations from friends and family above all other forms of advertising when making a purchase decision. Therefore, nothing comes close to the influence of word of mouth, and satisfied customers share their positive experience with more than five to ten people. Customers need to be able to trust what they buy. By building trust you are providing your customers with something of value which leads to a positive trend towards brand awareness. The winery sales team needs to be thinking about how to deepen the relationship with their customers, especially when they are not in buying mode.

Use automation to your advantage

There is no doubt that technology is there to help us. Try to make use of automated marketing software to engage, re-engage, and keep your customers up to date on what’s happening with your winery and products. Specifically, success stories at wineries have been reported using Customer Relationships Management (CRM) software such as Salesforce, Hubspot, Commerce7, WineDirect, and eCellar. All these CRM systems complement a full marketing methodology for wineries.  Make sure to use standardized email newsletters, event notifications, gated content, promotional emails, abandoned shopping cart reminders, and survey emails. Marketing automation will keep you one step ahead of your competitors by communicating more effectively and efficiently with your customers.

Use social media to your advantage

Social media can power your brand forward but can also be detrimental to your brand. Use social media to research your target audience, analyze your competitors, create engaging content, generate website traffic and grow your audience. Make use of customer reviews online and utilize this space to promptly deal with issues customers may have. By promoting brand awareness online, you create credibility and build trust with customers based on your online activity.

By implementing the above strategies, a winery can increase customer satisfaction, leading to an increase in customer retention. In today’s fast paced competitive market, the wine industry needs to focus their efforts on retaining customers and realise the importance thereof.

References:

Al-Hawari, M. 2005. The effect of automated service quality on bank financial performance and the mediating role of customer retention. Journal of Financial Services Marketing, 10(3):228-243.

Cant, M. & van Heerden, C. 2010. Marketing management. Cape Town: Juta.

Godson, M. 2009. Relationship marketing. New York: Oxford.

Magatef, S. & Tomalieh, E. 2015. The Impact of Customer Loyalty Programs on Customer Retention. International Journal of Business and Social Science, 8(1):81.

McManus, L. & Guilding, C. 2008. Exploring the potential of customer accounting: A synthesis of the accounting and marketing literatures. Journal of Marketing Management, 24(7/8):771-795.

Peelen, E. 2005. Customer relationship management. Essex: Pearson.

Zhang, J.Q., Dixit, A. & Friedmann, R. 2010. Customer loyalty and lifetime value: An empirical investigation of consumer packaged goods. Journal of Marketing Theory & Practice, 18(2):127-139.