The team at Protea Financial understands that for a small, family-owned winery, the rhythm of life is deeply tied to the harvest. This time is a whirlwind of intense labor and passionate work. It’s also the most critical financial period of your year.
As you focus on perfecting your next vintage in the cellar, it is essential to recognize that financial data provides insights critical to sustaining long-term profitability. We recognize that, for smaller teams, employing a full-time accountant may not be practical.
That’s why we’ve put together this guide to help you manage your harvest accounting with precision, ensuring every dollar spent leads to a clearer financial picture and smarter decisions. We are here to help.
Why Harvest Accounting Matters for Your Small Winery
Accurate harvest accounting is essential for small, family-owned operations. It goes beyond simply tracking total yields; it enables a clear understanding of the actual cost of wine production. Without this information, important decisions, such as establishing pricing strategies and evaluating future vineyard investments, may be made on assumptions.
- Determining Your Cost of Goods Sold (COGS): The costs associated with harvest constitute the most significant portion of COGS. Calculating COGS accurately is critical for determining gross profit margins and establishing pricing strategies that support sustained profitability rather than merely breaking even.
- Informing Future Decisions: If a particular vineyard block or varietal incurs higher-than-anticipated harvest costs, this information enables more informed allocation of resources in subsequent years. Such insights can guide adjustments to management plans or alter sourcing decisions.
- Accurate Inventory Valuation: For small wineries, inventory often represents the most valuable asset on the balance sheet. The cost of grapes is a key factor in assessing that asset’s value. Proper accounting practices are essential to ensure the balance sheet accurately reflects the true financial position of the business.
The Key Harvest Cost Components
To track your harvest costs effectively, we recommend breaking them down into three core components.
1. Direct Labor Costs
This is often the most significant and variable expense during harvest. It includes all the hands that touch the grapes, from picking to processing.
- Tracking: Instead of using paper, consider utilizing a shared spreadsheet or a mobile app to record hours worked. Record not only the hours, but also the corresponding task or vineyard block. This approach helps identify where labor costs are concentrated. For instance, it is possible to calculate labor cost per ton by block or varietal.
- What to Include: Include all associated labor expenses, such as payroll taxes, workers’ compensation insurance, and overtime, as these can add to base wages.
2. Materials and Consumables
These are the physical items you use from the moment the grapes are picked until they’re in the tank.
- Tracking: Establish a comprehensive log to record every consumable item, including picking bins, cleaning agents, yeast, and nutrients. Document the purchase date and, where feasible, reference the specific lot or tank in which each item was utilized.
- Significance: Maintaining this level of detail enables precise allocation of material costs to individual wines, thereby ensuring the accuracy of final cost of goods sold (COGS) calculations for each product.
3. Overhead Allocation
Overhead costs are the less obvious but equally important expenses that support the harvest.
- What to include: Fixed costs remain the same regardless of whether one ton or one hundred tons are harvested. These may include some utility expenses (such as electricity for the press), insurance, and winery equipment depreciation (such as crusher and de-stemmer).
- How to allocate: These indirect costs should be allocated consistently. For a small winery, one approach is to assign a portion of these costs to each ton of grapes. For example, if total overhead for the month amounts to $2,000 and 50 tons are harvested, $40 per ton can be allocated to grape costs. This method helps ensure the final cost accurately reflects all relevant expenses.
Technology: Your Best Friend During Harvest
Technology can benefit even small, family-owned wineries. It is not necessary to implement a complex system to begin making use of technological tools.
- Accounting Software: Cloud-based accounting solutions such as QuickBooks Online or Xero enable efficient management of expenses, invoicing, and transaction categorization in real time. These platforms integrate directly with bank accounts, thereby minimizing manual entry and enhancing productivity.
- Simple Apps: Numerous accessible applications are available for time tracking and expense management. These tools offer cost-effective and user-friendly options that eliminate paperwork and help ensure data remains current.
- Spreadsheets: Well-structured spreadsheets serve as effective resources for monitoring labor and material costs. Maintaining accuracy relies on consistent and careful entry practices.
The Protea Financial Solution for Small, Family-Owned Wineries
We know that even with the right tools, harvest accounting and bookkeeping tasks can be daunting. That’s why we’re here to help.
- Expert Guidance: Our team provides comprehensive assistance in establishing an efficient system to track your harvest costs. We offer detailed assistance with accurately allocating labor, materials, and overhead.
- Timely Support: Throughout the harvest season, we are available to address all your questions and ensure your accounting remains accurate and up to date.
- Seamless Integration: We facilitate the integration of your harvest data into your overall financial statements for thorough and cohesive reporting.
An optimized harvest accounting process is a powerful tool for your winery’s financial health, no matter what size winery you have. It empowers you to make smarter decisions, ensuring that every drop of hard work in the vineyard translates into a profitable and sustainable business for generations to come. For help with keeping the accounts of your small, family-owned winery in order, contact Protea Financial. Let our team help you thrive!
