Do you only record the credit card deposits that you make through your POS or Shopping Cart program? If so, you are not alone because this procedure is so ubiquitous in the Wine Industry, some folks consider it an industry standard.
If you are doing this, you are missing out on a wealth of information. Instead, we believe that you should be recording the details of the sales. For that reason, it is one of the steps in our Fundamental Five, which is our system to set up QuickBooks for the Wine Industry.
There are two ways to record the information in QuickBooks: the Push-in and the Summary Method.
The Push-in Method will create a sales receipt in QuickBooks for every sales transaction in your POS program. Whereas the Summary Method summarizes the sales into one sales transaction. This could be a daily or monthly summary. Both methods work, but our favorite programs will make this process easy.
A good program must have these characteristics:
- Record sales by channel. They might call this “sales type”
- Record the sale price of each wine after any discounts
- Have reports for the Summary Method or the Push-In Method
Some features that might be important to you:
- Supported by WGits by Wine Glass Marketing**
- Integrate with ShipCompliant/Compli
- Correctly handle split tenders
- Use on an iPad
- Accept tips for your crew
**In 2022 I began using the WGit software that automatically syncs the sales in the POS program with QB. You can choose if you want to see the individual sales in QB (the Push-in method) or a daily summary by channel (the Summary method). AND you can choose if you want QB to use cases or bottles. This program is a game-changer. There are some excellent POS programs that do not work with this tool, so working with the WGit is not a Must-Have feature.
If you are shopping for a new POS program, be careful because the sales team will proudly show off all of their bells and whistles. These features are exciting, but they often mask a complicated program for your bookkeeping team to use.
Also, (and I don’t like having to give this warning because I love how the wine industry is so open and willing to share tools, advice, and even team members), please be careful when someone says “we love XX” or “we don’t like XX”. Unless that winery is willing to share its financials and financial management processes, you could be unwittingly relying on outdated and ineffective procedures.
We recommend that you first identify whether a program has the three primary characteristics listed above. Then identify any other features that are essential for your business model. Focus on that shortlist and pick a program with just a few useful bells and whistles.
Our Fundamental Five Course shows you how to set up both methods in QB Desktop and QB Online.
It will also give you a roadmap for setting up QuickBooks correctly. Once you get QuickBooks properly set up, you will be able to run powerful reports to see for yourself how the business is doing.
You owe it to yourself—and your investment to find out more about how the Fundamental Five Course.
If you pay vendors through a third-party payor like PayPal, Venmo, Zelle, and more, you need to be aware of a significant change in the rules that went into effect on Jan 1st, 2022. If you miss this update, you will have a very difficult time when you prepare the 1099s in 2023.
What is a 1099-K?
A 1099-K is a form you could receive, so you don’t prepare these. If your customers pay you with credit cards or if they pay you through a third-party network such as PayPal, Zelle, Venmo, etc, then you will receive a 1099-K if the amount that is processed exceeds the threshold. For the calendar year of 2021, the threshold is transactions totaling at least $20,000 AND at least 200 transactions.
Similar to all 1099s, these forms are sent to recipients and to the IRS by January 31st following the year. Of course, the IRS uses these to confirm that folks have reported at least the amount of income shown on the form.
Your vendors might receive a 1099-K as well. This is why the IRS instructions say that you do not report payments made by credit cards or through third-party networks on the 1099-NEC and 1099-MISC that you file because it is possible for the vendor to have payments reported twice: once on the forms you sent and again on the 1099-K.
Because of this “loophole” many sole-proprietors and independent contractors did not receive any 1099s. As a result, accountants (including us) recommended that you report all payments to eligible vendors regardless of the method of payment. This was to prevent you from the potential liability of failure to file, even though the IRS rules created this loophole.
In practice, because the threshold was so high many independent contractors and smaller companies did not receive a 1099-K, thus the vendor was rarely faced with this duplicate reporting situation.
What is changing in 2022?
Beginning Jan 1, 2022 (which is for forms reported in 2023, the threshold has changed considerably.. The new threshold is payments that exceed $600 and any number of transactions. This means that many more vendors will receive a 1099-K, specifically the ones who have benefited from the loophole.
Let’s say that you paid a vendor $1,000 through Venmo. If you continue to report all payments made through a credit card or third-party network, that $1,000 payment will now show up on both the 1099 that you send and the 1099-K that Venmo will send. The vendor will not be happy, and you will get a call to fix it.
At the end of the year (which is actually in January), when you pull your report of the payments to the vendors, it is easy to exclude the credit card payments. The tricky part is excluding the payments made through a third-party network.
Most wineries don’t keep a balance in their PayPal, Venmo, Zelle, etc accounts, because they typically only use those networks when they need to pay a vendor immediately or if the vendor is not set up to receive credit card payments (or if the vendor is playing with the loophole). The wineries set up their accounts so that their bank account is debited the amount of the transaction. The transactions show up on the bank statement as a debit to PayPal/Venmo/Zelle/Other, but in QuickBooks, the entry is either a check (QB Desktop) or an expense (QBO) filled out to the vendor. Sometimes there is a comment in the memo saying that the payment was through a network.
The problem is that at the end of the year when you prepare your 1099s to send to your vendors, there is no way to identify those third-party payments so you have no choice but to include those amounts in the total amount paid to the vendor on the 1099s. You have some options on how to fix this:
- Stop paying vendors through PayPal/Venmo/Zelle/Other third-party network
- Take the time to review all the payments and hope that you put a note in the memo
- Make some small changes to QuickBooks and record these payments slightly differently
We will be explaining our recommended procedure to the Silver Club members at the next office hours.
We also have a mini-course on filing the 1099s. This course is updated every year to handle changes in the laws. The 2022 version includes a lesson on how to set up your QuickBooks file so that you are ready for the 2023 reporting season.
Most wineries dipped their toes into the world of virtual wine tastings in the spring of 2020. For some wineries, these tastings have stuck and continue to be a source of both revenue and new fans and club members. Check out what some Napa Valley wineries are doing.
From a business point of view, I think the virtual wine tasting channel is valuable for many reasons. First, you can isolate the costs of running the virtual channel very easily. The staff is scheduled only when you have guests to entertain, so no more waiting around or guessing how many staff to plan for a weekend.
Second, you can isolate the advertising costs. Your goggle or facebooks ads have tracking codes so you can see the conversion rate and from that calculate the total revenue. There is a direct correlation between a specific ad and the revenue generated from that ad. Back in the 1800’s John Wanamaker said that half of his advertising was wasted, he just didn’t know which half. These tracking codes eliminate that blind spot.
Third, once someone attends a virtual event, you now have their email address and so you can send them news another emails. With CRM tools built into most winery POS programs, you can track the lifetime value of each customer. You can also identify how they became customers of yours. The revenue from the tasting kits should cover the marketing cost, so the added value of future sales either as a fan or as a Club member means additional revenue down the road.
Personally, I think the virtual tasting channel is an exciting opportunity to attract a huge number of wine lovers who just cannot make it to wine country. Those folks would love to be able to “visit” wine country from the safety and comfort of their homes. I also like virtual tastings because the best virtual tastings I have attended were a collaboration among several wineries or between a winery and a restaurant. The wine industry has a long history of being very generous and helpful with their neighbors even though they are technically competitors. The virtual channel keeps that spirit alive.
If you are tired of the COVID and mask debates, then turn your attention to another set of laws and regulations that varies from state to state and even county to county: the liquor license guidelines. During the 13 years of the great experiment called Prohibition, the debate du jour was over the personal liberties that were impacted by prohibition. Fun fact: Last year (2020) was the 100th anniversary of the passage of Prohibition.
The deal the politicians struck to end Prohibition gave each state the right to establish its own rules around the sale of alcoholic beverages. Thus we now must navigate over 50 different sets of rules (not unlike today’s mask rules that vary state-by-state).
That is one of the consequences of repealing Prohibition. However, there is an unintended consequence that was not part of the official legislation. According to Tom Wark, what actually unfolded was a whole set of rules around the three-tier system that now limits out-of-state sales through the distributors. This layer of rules is not part of the 21st Amendment yet they continue due to the economic and political power of the distributors. Read Tom’s article here.
Frankly, today’s mask debate seems pale in comparison. If you have a choice between wearing a mask or not being able to buy an alcoholic beverage, which would you choose?
Harvest is just around the corner, and soon after the grapes arrive, the grape bills arrive.
This is one of those steps that is only done once a year, so it is easy to forget how to handle them.
- Did you know that there is an easy way to track the number of tons you brought in?
- Do you know how to easily track and plan for multiple payments when the grower has given you generous payment terms?
- What is the right way to handle assessments?
If you are a winery owner, manager, staff, or accounting professional, I’d like to show you how to make your life easier by Tracking Grapes.
Silver Club members, this video is also in the Learning Library in the Mini-Course Hub.
Harvest is here!! Grapes are rolling in!!!
To celebrate, I held our final summer webinar on how to handle the grapes, weight tags, assessments, and more. In these webinars, we usually discuss the Fundamental Five, which is our system for setting up QuickBooks so that you can use the information to increase the profitability of your winery. However, this time I talked for a full hour on a topic that will not help you become more profitable. Nope… nada … not one single useful profit tip.
Why did I do this? Because I am hoping to be a little less grouchy at year-end when it comes time to assemble the Costing Book. I love handling the costing process, but the part that takes me the longest is chasing down basic information about the grapes. Often I end up guessing which is not a good start to calculating the True Cost.
Part of the problem is that the growers rarely send a bill. (I actually send them a summary.) The other problem is that the winemaker usually tracks many of these details on an excel spreadsheet. That’s fine if they want to use excel to log the brix, additions, and other winemaking details. But by the end of crush, after countless long days and late-night punch-downs, the information about the number of tons, the cost per ton, and payment terms are less than complete at best. When I have to untangle the grape payments in QuickBooks and get them to match their excel spreadsheet, it never goes well.
The most efficient method is to record the weight tags in the accounting program because the weight tags are a source document. If we discover that the chicken-scratching that looked like “5” was really “7” it is easy to pinpoint the mistake and correct it. How about that load that was split with the neighbor? Making 1 barrel of wine from 1/2 ton of grapes costs the same as using 1 ton at half the cost per ton. I prefer to invoice the neighbor and get the right yield and cost per gallon.
Don’t get me going on the way the names change. The weight tag shows a vineyard and maybe a block name. But the check will be written to someone completely different. And the name of the bulk lot will usually be another name. Please, just give me the weight tag so I can sort this out.
If you want to make the person doing your costing less grumpy, please consider these steps when you enter your grape bills:
- On the check or bill, enter each varietal on a separate row. Include the number of tons and the cost per ton in the description.
- Record the entire amount of the grapes purchased the year of harvest, regardless if you have terms and are paying for the grapes the following year. In the webinar, I showed 2 methods of handling the second payment. Pick the one you like the best.
- Record the assessments correctly. If you deduct this from the grape payment it is NOT a reduction in the cost of the grapes.
In the webinar, I also showed several tips for wineries with larger production levels, thus more grapes and weight tags:
- Enter 1 bill for each weight tag.
- Combine the weight tags for each grower into the payment bills.
- Use the “item” tab with a non-inventory type item called “grape.”
- Use Purchase Order to record the number of tons and the cost per ton that you plan on purchasing. Of course, Mother Nature is never going to deliver what is on the purchase order, but at least the cost per ton will be correct.
- Run the Open Purchase Order detail report several times in the middle of the season to see how many tons are left to bring in. This will help you stay within your budget (or it will help you know how much you need to increase your line of credit).
For the recording of the webinar, head to this page
If you follow these steps I guarantee that the person handling your costing will be less grumpy. And they might have some leftover brain cells to help you figure out a new way to increase the profitability of your winery.
Note: I am not a CPA. My comments are a summary of the article published on www.Forbes.com by Alan Gassman and his team, which includes CPAs and attorneys. Please consult with your advisors to confirm how this program applies to your business.
Link to Alan Gassman’s August 5th, 2021 Article: Newly Issued Employee Retention Credit Guidance Punishes Owner Employees if they have Living Family Members
On August 4th, 2021 a full 226 days after the last major update in December 2020, the IRS issued a Notice that states the wages of owners and their spouses of S-corporations who own more than 50% of the business are not eligible for the ERC.
In the bill that Congress passed last December, close family members were specifically excluded from the ERC, because they apparently didn’t want small businesses to pad their payroll with Aunt Sally and Johnny-the-couch-surfing-brother-in-law. Congress seemed to be OK with allowing the wages of the owners and their spouses to be counted as eligible wages. However, the IRS interpreted the rules differently and excluded owners and spouses if they have ANY living relative.
According to Alan Gassman “Only orphans that have no children are able to get the credit, while it is people with large families who need the credit to support their families. This is anti-family, unamerican, and utterly without logic or justification.” Furthermore, Alan anticipates that Congress or the President will fix this problem.
If you are the majority owner of an s-corporation (more than 50%) and you have any living relatives, here are your options:
- If you have already filed a 941X to claim the ERC and included the owner’s and spouse’s wages, go ahead and let those forms process as is without amendment.
- If you intend to file additional 941X forms but have not yet submitted the paperwork:
- Wait a few months until this gets resolved, then file
- If you really need the cash, file now without the owner and spouse. You can always amend a second time.
Remember if you are in California or any region that had a state or local agency mandated restrictions where you could not serve 100% of your pre-pandemic occupancy, then you automatically qualify for the ERC. In California, the wages paid from mid-March 2020 until June 15th, 2021 are eligible wages. You might qualify based on other guidelines through Dec 31, 2021. If you received a PPP Loan, you cannot count the same wages for both programs. Despite this limitation, the ERC has resulted in significant refunds from the IRS.
If you have not take advantage of this program, please contact me HERE.
Are you one of the 6.5 million folks who earned a PPP Loan but have not yet filed for forgiveness? Congratulations, you are in good company, because over 50% of folks who received a PPP Loan have not filed for forgiveness. The reason there are so many of you is quite simply because the process is complicated. Pick any combination of these reasons:
- The PPP program rules keep changing
- The words and terminology don’t seem to apply to your situation
- Every bank uses a different process. (I have filed over a dozen forgiveness applications, and I got stuck somewhere on each one.)
- Basic procrastination
I don’t want to encourage more procrastination but know that you can file for forgiveness anytime until you pay off the loan. HOWEVER you will need to begin making interest and principal payments 16 months after you received the funds (technically 10 months after your 24-week covered period).
If you received your PPP Loan in mid-May, then expect to begin making payments around August 30th.
Here’s a tip: once you submit your forgiveness application, you won’t need to make any payments until you receive a final determination on forgiveness. So do yourself a favor and do it now. For all loans below $150,000, the process is simple. The SBA opened their own portal (finally) to speed up this process. The SBA calls this the Direct Forgiveness program. If your bank has signed up, then the process is even simpler.
Check if your bank is participating by clicking HERE. This list is updated regularly. These tend to be the smaller banks that didn’t have the staff to manage the loans or build portals. If you don’t see your bank, give them a call, and ask if they plan on participating.
Here is the new SBA Portal
As always, reach out to us HERE if you need any assistance. You will sleep better once you get this handled. Promise.