QB Winery Solutions

Office Hours 3-24-20

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Here is the recording for Office Hours today. You can find the following wine accounting & QuickBooks topics in this month’s recording:

  1. Square Sales Summary Procedure (3 minute mark)
  2. Sales Summary Procedure – Sales Tax  (7 minute mark)
  3. Sales Tax Item for your Local Sales Tax Rate (16 minute mark)
  4. Sales Shipped out of California –  Tax rules (20 minute mark)
  5. Automations synced to Square (25 minute mark)
  6. Tracking Exclusions on a spreadsheet (27 minute mark)
  7. Custom Summary Report to filter depletions (33 minute mark)
  8. Budgets and Forecasts (35 minute mark)
  9. Virtual Tastings (43 minute mark)

 

Silver Club members, please log in to view the recording

2020 SVB State of the Wine Industry Recap

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As usual, the report is a good read. It’s also filled with charts and some wonderful photos, so be sure to print it in color! Go ahead and dive in anywhere, as you will undoubtedly land on something interesting. Here is a guide to what each section of the report entails.

  1. Introduction – Read these 2 pages for an overview of the main themes in the report.
  2. Executive Summary (3 pages) – This lists the 7 headwinds and 7 tailwinds.
  3. 2019 Predictions in Review (2 pages) – I love that Rob is willing to admit what they got wrong.
  4. 2020 US Wine Predictions and Observations (2 pages) – Key topics are Supply, Demand, and Price.
  5. Grape and Wine Supply (8 pages) – The is an oversupply, but you probably already noticed this.
  6. Wine Sales (20 pages) – Sales are flat everywhere. Rob has been discussing this issue for a while, therefore, this is not new, but still interesting.
  7. Demographics and Marketing (11 pages) – Rob feels that the wine industry has done a poor job of reacting to changing customer values in its key messaging.
  8. Land and M&A (2 pages) – If you were considering selling, now is not the time.
  9. Cumulative Negative Health Messaging (3 pages) – There is a strong neo-prohibition direction coming from government agencies. At the same time, the Millennials are very health-conscious, and they are picking up on this message.

Rob led two, one-hour discussions with a panel of experts to discuss the report. To be honest, I only listen for issues that I feel are useful for the family wineries. Much of the discussion is primarily focused on that other wine industry (the large, distribution focused wineries).

In the first session, my big takeaway was the neo-prohibition messaging that has quietly taken hold. The book “The French Paradox” and the report on “60 Minutes” all happened 30 years ago. (Remember when we all watched “60 Minutes?). It caused a surge in wine drinkers, particularly among the Boomers. Now those Boomers are “aging out” and the new generational cohorts are hearing a different message about wine. At the same time, several other alcoholic beverages have managed to find and spin a health benefit associated with their product (for example Vodka is gluten free!). Rob feels that the wine industry can do more to “bring balance to the conversation”.

In the second session, I was delighted to hear a shift away from last year’s statement that “the tasting room model is dead”. Instead, they suggested ways to continue the conversation with the visitors you initially meet in your tasting room. Continuing the conversation can be through emails, social media, or even a good old fashioned telephone call. These are suggestions that family wineries can easily implement. Large wineries simply cannot do this and will never have the genuine relationship with their customers that family wineries can develop.

Personally, wine has always been about connecting with my friends and family. Good wine always seems to stimulate conversation in a way that beer and cocktails simply don’t. With that being said, I encourage you to find new and different ways to connect with your visitors. I guarantee that both of you will enjoy the conversation!

Silicon Valley Bank webinar replay

 2020 SVB Annual Report

 

SVB Annual Direct to Consumer Wine Survey

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THE 2020 SURVEY HAS BEEN CANCELED, BUT MAY BE RE-OPENED AT A LATER DATE.

SEE THE LINK BELOW TO REVIEW THE 2019 SURVEY RESULTS

Here is a message from Rob McMillan and his team at Silicon Valley Bank

“Today more than ever, the wine industry needs to be more strategic and proactive in the direct to consumer approach. It can be the difference between success and failure in the coming decade. How do we know? Silicon Valley Bank and Wine Business Monthly have been collaborating for almost 10 years on an annual survey on direct to consumer wine sales. The survey is now open through March 20th.”

Download the instructions: 2020 SVB DTC Survey Instructions

Here’s a video to help you complete the survey: Instruction Video

Download the Survey Questions: 2020 SVB Survey Questions

Go here to take the survey: SURVEY  We will update if the survey is re-opened.

Here is last year’s webcast: Webcast

Is your QuickBooks file healthy?

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It’s spring and you should have finished closing your QuickBooks file for last year. Therefore, now is a great time to do some Spring Cleaning! This means it is time to check out the health of the file.

Open QuickBooks and hit the “F2” key to see the Product Information window.

 

 

 

 

File Size: When the file gets too large, it will run slowly. Reports will take a long time to load and new transactions will take a long time to save. This is super frustrating because we all have a hundred things to do at any given time; however, a file with data damage can be very expensive to repair. If you push-in the sales receipts from the POS program, you will reach the maximum file size limit much faster than a winery that does the summary method. If you hit that maximum file size limit, or if you notice that the program becomes sluggish, then it is time to condense the file. Intuit suggests these maximum limits:

Pro/Premier – 400 MB (that’s 400,000 K)

Enterprise – 1.0 to 1.5 G (that’s 1,000 to 1,500 MB)

If the file in the example above was Pro/Premier, then with 300,000K, they are still looking good. In this situation, you should check again in approximately six months to review how the file grew during the six-month timeframe.

DB File Fragments: By design, Microsoft writes bits and pieces of the files throughout the hard drive. This is why you should “de-frag” your hard drive on a regular basis so that you can put the pieces of the files back together. The “DB File Fragments” tell you how many pieces your QuickBooks file is broken up into. This number should be no higher than 10. Too many fragments can create data damage. You want to avoid that scenario at all costs because repairing data damage is both painful and expensive.

File Verification: You should be running the QuickBooks backup with Full Verification on a regular basis. Do not rely on the cloud backup that you also have in place, therefore this step is not part of the Spring Cleaning routine. The file verification will tell you if you have any errors. Let’s assume you are doing this at least weekly – are you getting a regular message to Rebuild the file? If so, double-check the DB File Fragments and File Size. If that doesn’t fix the problem, then give your friendly ProAdvisor a call.

READ THIS FIRST: Before you condense, you must clear up all of the errors. The condense will not fix errors and it can make some errors worse. Therefore, first fix the file fragments, then do the condense. As a side note, before you upgrade the file to the newest version, complete these steps and fix all of your errors first. The upgrade will not fix errors either.

To fix the file fragments, you do what we call the Portable File Round-Trip:
Make a Portable file (File -> Create Copy -> Portable Company File).
Restore that file and give it a new name. I typically change the “tail” of the file name instead of changing the whole filename.
Do this 2 more times.
You will do 3 round-trips; this should reduce your file fragments to one, as in the example above.

If you need to condense, read on….

If you have QB 2019 or newer, Intuit added a new condense feature that deletes the Audit Trail. This can reduce the file as much as 30%. Murph (one of us ProAdvisors’ favorite go-to tech guy for all things QuickBooks), typically doesn’t like the QB condense feature, but he really likes this new option.

Step 1 – Make a backup with full verification.

Step 2 – Pull a current trial balance. You will use this to compare the file after the condense.

Step 3 – Condense by deleting the Audit Trail. (File -> Utilities -> Condense File) Make a backup before you start, and store this is a safe place because you never know if you will need this information.

Step 4 – If you want to make the file even smaller, use the second step of the condense to remove selected transactions. The usual choice is “transactions before …” then pick a date. In the next window, you have 3 choices about how to handle the transactions that will be removed.

  1. One summary journal entry: This is a good choice for you folks in the wine industry. However, the journal entry does not show the class or the item detail, therefore there is no useful information. However, this option will make the adjustment to true up the file to match the original Trial Balance minimal.
  2. Summary journal entry for each month: This information is virtually useless for the wine industry, so don’t bother. It also takes a long time to run.
  3. Don’t create a summary: This is also a good choice because the information in the single journal entry is essentially useless. You will need to create a journal entry to adjust the beginning account balances.

For a detailed list of all the steps, refer to this article by Intuit, or call your favorite ProAdvisor.

Condense Data File

If you find that the Trial Balance has a huge discrepancy from the original Trial Balance, or if you are getting some goofy results, then it is time to call a specialist. I recommend Matt Clark, who is essentially a QuickBooks file doctor.

Good luck and always remember to make a backup before you start so that you can restore the file if the results are not what you expected!

Another Compliance Problem – Wine Club Automatic Renewals

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The Wine Institute recently held a webinar to warn members that professional litigators are targeting wineries with wine clubs who fail to meet the requirements of the Automatic Renewal laws. (If you are a Wine Institute member, log into the member’s area for a replay of this webinar.) Remember the ADA problem a few years ago? This is a similar situation, whereby attorneys are taking advantage of obscure and lesser-known laws by targeting small businesses that do not adhere. They know that small businesses do not have the resources to fight a lengthy battle. They count on settling for an amount that is just enough to be painful; however not enough to fight.

The law I’m referring to is in regards to the automatic renewal laws which apply to your wine club membership. This issue is so obscure that the only article I  found was published by the Santa Monica Daily Press! Thanks to the Wine Industry Advisor for mentioning this article. Click here to READ ARTICLE.

As I mentioned, this is not a new issue. In 2015 several regional district attorney offices formed The California Automatic Renewal Task Force (CART). That group met with the California Alcohol Beverage (ABC) and they issued an advisory. Here are the 4 key features that you must follow to be in compliance:

  • Disclosure – Disclose automatic renewal offer terms in a clear and conspicuous manner (larger font, contrasting font or another way to call attention to the terms)
  • Consent – Obtain affirmative consent before charging the consumer (ex: a checkbox)
  • Acknowledgment – Sorry, this does not translate to standard English
  • Cancellation – Provide an easy, user-friendly method for cancellation; also, if the initial signup was done online, members must be able to cancel online

For the full advisory CLICK HERE

If you are not in California, be advised that the Federal statutes are similar. There are penalties at the Federal level as well.

Please consult with your attorney to confirm that you are in compliance with all features of these laws. We all know how easy it is to fall prey to a subscription service that we did not intend to pay for. These rules are not difficult to follow, so I urge you…don’t be one of those services.

One more thing…if you are not a member of The Wine Institute, consider joining! They are great advocates for the wine industry. They have spearheaded the agenda of growing the list of states where we are able to ship wine directly to customers.

Links mentioned in this post

Wine Institute   https://wineinstitute.org/

Alcohol Beverage Control advisory on Club Renewals   https://www.abc.ca.gov/club-renewals/

Santa Monica Daily Press article   https://www.smdp.com/wine-settlement-is-latest-success-for-consumer-protection-law/186738

Wine Industry Adviser   https://wineindustryadvisor.com

 

Questions for your Tax Preparer

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If you ask your tax preparer to explain the difference between your True Income and your Taxable Income they should be able to easily answer this question. However, what if you asked your tax preparer to explain the difference between True Cost and Taxable Cost? If this question made you (or them) say “huh?”, then read on!

It’s tax season, therefore the term Adjusted Gross Income (AGI) should have crept back into your brain. AGI is the amount of money that you use to calculate the income tax which you owe. In plain English, AGI is also called Taxable Income. How is it calculated?

Take your True Income, which is the amount of money that you earned before deductions and taxes. You will find this in box 1 on your W-2 form. You may also have interest and dividend income. The loose change found in your sofa doesn’t count.

Subtract as many deductions as possible – this should be easy for everyone. If you have a good tax preparer, they will find as many legal deductions (aka, loopholes) as legally allowable (some unscrupulous preparers will find a few more). You know the concept…the more deductions the better.

Next, let’s talk about your Taxable Income – the amount used to base the income tax that you will owe. The lower the number the better.

Your Taxable Income will vary depending on the tax rules in place each year. For instance, let’s say you made the same True Income, before and after any of the “tax reform” bills of the last 30 years. In most circumstances, your Taxable Income will be different. Sometimes “tax reform” changes the tax table. However, most of the time Congress fiddles with the deductions. If you were on Congress’s good side, your Taxable Income went down. If Congress thought you were not important (or not paying attention), your Taxable Income went up.

Your True Income is always bigger than your Taxable Income. And your True Income doesn’t change depending on which party is running Congress, or whether a “tax reform” bill was recently passed. You base your most important decisions, such as “Can I afford to buy this house?”, on your True Income. In fact, lenders look at your True Income, not your Taxable Income to decide if you are able to pay the mortgage on that new house.

The cost of your wine also has a True Cost and a Taxable Cost. There are other similarities:

  • True Cost is higher than Taxable Cost (except for very large wineries who are not using QuickBooks and are not reading this article)
  • The lower the Taxable Cost the better
  • True Cost does not change when Congress passes new tax legislation
  • You need to make your most important decisions based on True Cost

I work with a winery that initially made less than $1 million dollars in revenue. Within a few years, thanks to their awesome wine (and an excellent CFO…Yours Truly!), their sales grew to over $1 million dollars. At that point, their taxable cost more than doubled because they passed the $1M threshold, which was where the tax rules changed. Then, in 2018, Congress changed the threshold to $25M. This means that this winery (and all the others making between $1M and $25M) saw their taxable cost go down significantly.

Thus, in the course of five years, this winery’s Taxable Cost changed three times, and each change was significant. I cannot share their actual numbers. However, let’s revisit the ‘Three Muskateers’ from our How to Calculate The True Cost of Your Wine course or Discover QuickBooks for Wineries. Remember the True Cost for each of the wineries is the same. The first phase is similar to ‘Athos’ where the taxable cost was $36/case. The second phase was similar to ‘Aramis’ at $114/case because they had passed the $1M threshold. And in the third phase, it was back to ‘Athos’ at $36/case. (For purchased grapes the change is $90 to $197 and back to $90). If we had been managing the business using taxable cost, it would have been chaotic; possibly disastrous. Of course, we were using True Cost to manage the business, so the business continued to grow, and they could enjoy the tax windfall that first year.

The point is this: just as you have a True Income and a Taxable Income, your wine has a True Cost and a Taxable Cost. At your next appointment with your tax preparer, your accountant or CPA, ask them to explain the difference.

If your tax preparer’s response is “huh?”, then you have a big problem!

Office Hours 2-25-20

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Here is the recording for Office Hours today. You can find the following wine accounting & QuickBooks topics in this month’s recording:

  1. Picking Bins – What Account should they be sold under? How is it invoiced and how’s it taken out of assets? (1 minute mark)
  2. VinoShipper – an option for small wineries looking to ship out of state (11 minute mark)
  3. Costing & Grapes – Growing your own grapes? What’s your yield of Farming VS Winery? (14 minute mark)
  4. Changing to cash basis for the tax return. (23 minute mark)
  5. Ready to sell wine? How to track bottle sales & sales by the glass (29 minute mark)
  6. Managing gratuities (33 minute mark)
  7. Traveling to events to sell your wine? Changing the tax rate using Square (35 minute mark)
  8. Preferred Class Lists – Keep them simple (43 minute mark)

Need help with creating classes and job flags? Watch “Using QB in the Wine Industry” for more information.

Silver Club members, please log in to view the recording

Office Hours 1-28-20

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Here is the recording for Office Hours today. You can find the following wine accounting & QuickBooks topics in this month’s recording:

  1. Units of Measure, getting started (1 minute mark) **I solved George’s problem and added a comment to the Units of Measure procedure
  2. Details on a new course – The Costing Book Checklist (5 minute mark)
  3. AMS and Vintrace to QB  – Converting from those programs to QB (7 minute mark)
  4. What POS programs do you recommend? Vinespring (11 minute mark)
  5. We’re donating all bottle proceeds to a special cause – How do I record it? (12 minute mark)
  6. 1099 review of new CA law (13 minute mark)
  7. Should I use Vinespring as a POS or Square? – It depends on the size of your winery (15 minute mark)
  8. VinoShipper – A discussion of workflows in VinoShipper (20 minute mark)
  9. Data dump for the Push-in Method – What does a transaction report look like? (24 minute mark)
  10. Bottle runs – How do I track 1st off and last off? (26 minute mark)
  11. Let’s chat about Kegging Wine (28 minute mark)

Silver Club members, please log in to view the recording

Cash Basis vs Accrual

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In honor of tax season, I am unlocking a lesson in the How To Calculate the True Cost of Your Wine so that everyone can hear this information.

This lesson explains the difference between Book Cost and Tax Cost and how the recent tax changes have affected this issue.

The critical points are:

  • You must use True cost/Accrual in your QuickBooks file so that you have accurate numbers to manage the business.
  • The tax preparer can convert from True cost/Accrual to Tax cost/Cash basis in their work-papers (but you cannot convert in the other direction)

For the non-accountants, in this context these terms mean the same thing:

Book cost = True cost = Accrual

Tax cost = Cash basis

We have an on-demand lesson for the tax preparers on how to convert from Accrual cost to Cash basis costing GO HERE .

We also offer live seminars with CPE on this very topic, led by Tyler Willis, CPA . For the schedule GO HERE.

2020 SVB State of the Wine Industry Report

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The annual State of the Wine Industry Report prepared by Rob McMillan and his team at the Silicon Valley Bank Wine Division is here! It’s hot off the press, so I have not had a chance to read it. I watched the first webinar on January 14th, and I will watch the second webinar on January 22nd.

In the meantime, check out Rob’s blog where you can get links to the recordings of the webinars.

2020 SVB Annual Report

 

Cheers!

Jeanette

The Crush

Your first step to running a profitable winery and crushing your business goals.