Government compliance is a necessary part of every winery operation whether you are producing 500 cases or 5,000,000 cases. The requirements do not change based on the size of your operation which makes adhering to the myriad rules somewhat daunting for the small producer. And since the government collects taxes based on the information supplied by wineries, they have an incentive to make sure things are reported correctly.
30 years ago there were limited options for all but the largest wineries, leaving smaller businesses tracking everything on paper. This made it difficult to provide a detailed audit trail to the government of all cellar activities in the event of audit. In many cases the justifiable response of the winery was that there just weren’t enough hands on deck to work in the cellar and maintain a paper trail.
Now though, all the government agencies involved in compliance are well aware that detailed records can be tracked and they expect wineries to comply with their rules in a timely manner. This usually means using an outside compliance agency, a specialized software package, or general purpose software like spreadsheets to track your wine production. It is a very rare winery that isn’t taking advantage of one of these three options, and usually it means that the winery hasn’t yet had a discussion with the TTB!
OK – you decide to start tracking things, where do you begin? What are the most important pieces of the production puzzle to track?
Let’s start with the grapes themselves. You need to be able to account for all the grapes coming into the winery and where they ended up. You need to record when they arrived, what varietal they were and from what vineyard and appellation. If you kept each batch completely separate and then bottled that as its own product, then proving the validity of the information on your label is a piece of cake. However, if you do any blending or topping between batches it can start to get messy because you need to account for where all the grapes went regardless of how many products it went into, even if it’s a tiny percentage of the final product. Here’s where things start getting difficult in using spreadsheets. It’s difficult to track tiny percentages of wine moving around from barrel to barrel when blending or topping. Yet this is just the tip of the iceberg in compliance.
Then there’s the reporting requirements that must be met that account for any gains or losses, wine used for or produced by other processes, and you must do this by tax class, which can change over time or because you blended two wines together from different classes. And if you are adding any sugar, or spirits, that too must be tracked. Oh yeah, and if you are producing fruit wines, that must be tracked separately from grape product.
So now you’re thinking – I’m going to get my accountant to track and report all this stuff, which is great. Except that you probably aren’t sending him every work order you’re writing to see what wines are used for topping other wines and what wine volume changes are happening at each step of production. All this can have an impact on how you report your gains and losses and how your varietal percentages are changing. So when they go to reconcile by doing a physical inventory, invariably numbers don’t add up and now someone has to figure out why. And that someone will probably be you.
This isn’t a horror story, this is the typical process that every winery deals with at some point when they say “Isn’t there anything out there that can help me manage this without costing me a full time person to track what’s going on”. The answer is, yes. You need a powerful tool in your arsenal to allow you to satisfy the government compliance requirements. And there are a whole host of requirements you need to satisfy including:
Wine Composition by Variety, Vintage and Appellation (and usually Vineyard) and is it Produced by you or just Prepared by you
Inventory tracking by Tax Class and type of product (Grapes, Fruit, etc.) – gains and losses, used and produced
Finished Goods Inventory tracking – breakdown of adjustments (breakage, used for testing, used for tasting)
Additives – tracking by lot number and what are the allowable levels
Barrels – which barrels have been used in which lots?
Special processes – accounting for de-Alc processes, sugar additions, spirit additions and water additions
Finally, there have been discussions about furthering the requirements to include full ingredient tracking like most food products do already. And there’s the concern about allergens in wine and should there be more stringent requirements for record-keeping when using certain products in wine production. Government Compliance rules don’t usually move very quickly, but they do change over time and it’s not likely that they’ll get looser in the process.
The good news is that there’s already a solution that covers every one of these issues – VINX2. A software solution that is already doing this for hundreds of wineries throughout the world. Backed by our stellar support team, we concentrate on the things that makes your life crazy to free you up to get back to the cellar.