How do I capitalise Expenses or other Asset costs to wines that are entered into Xero as invoices

This article assumes that you have already linked Vintrace and Xero and understand the basics of the accounting integration.

For example you are a wine producer that sends off your wine to a third party for bottling and they have sent you an invoice for the service, and you want to capitalise that cost into your bulk wine/bottled goods in vintrace.

Below is an example of the breakdown of the invoice that the third party company sent you for their bottling service:

Bottling setup fee – $1000
Bottling service charge –  $2000
Bottles – $120
Dividers – $80

This service wasn’t entered into Vintrace as a purchase order and was entered directly into Xero as an accounts payable invoice. The following procedure outlines how to capitalise that expense, should you wish, to your bulk wine or finished goods inventory.

Setup cost items

Firstly, you need to setup a cost item from Winery setup – Costing for each of the cost breakdown in the invoice and link them to the appropriate expense account in your general ledger.

Note: You can override the Default value ($) later on when you add the cost item to a bulk wine/bottled goods/packaging operation.

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You can either add the cost items to the bulk wine or the stock item to capitalise them.

Adding costs to the stock item/bottled goods

You can add the costs to the stock item/bottled goods by going to Stock item overview – Actions – Add costs.

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Alternatively, you can do it by going to the Packaging operation screen then clicking on the Add cost button.

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Add the cost items you have previously created then click on Save button.

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When you go to the Costs tab in Stock Item Overview, you will see that the costs are added to the stock item that you are packaging.

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When you perform the Accounts sync, you can see that your Bottling expenses account is credited while your Bottling goods asset account is debited for the total value of the bottling cost items you have entered.

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This is how your manual journal will look like in Xero after you have synced.

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Adding costs to the bulk wine

You can add the cost items to the bulk wine from Product Overview – Actions – Add costs.

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Then add the cost items you have previously created to the bulk wine, then click on Save button.

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When you go to the Costs tab in Product Overview, you will see that the costs are added to the bulk wine.

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When you perform the Accounts sync, you can see that your Bottling expenses account is credited while your Work in progress account is debited for the total value of the bottling cost items you have entered.

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This is how your manual journal will look like in Xero after you have synced.

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Stock adjustment reason to be able to specify a cost item

This feature was added in vintrace Version 6.1.5

You can now define which cost item gets used in an adjustment reason when performing adjustments on stock so the costs end up in the correct GL account.

Firstly, you need to define the cost item you want to link to the adjustment reason by going into Winery Setup – Costing – Cost items and click on New Cost item button.

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Create the cost item for your adjustment reason by entering all the required data such as Code, Name, Default value, Cost type, Price per, and Account you want to link to this cost item. Then click on Save.

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Next, link the cost item to the adjustment reason by going into Winery Setup – Manufacturing – Adjustment reason and select the adjustment reason where you want to link the cost to.

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Select the cost item you have created for the adjustment reason.

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Every time you use that adjustment reason, the cost will go to the correct GL account.

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Be able to write off or transfer cost of bulk wine when measuring wine down to zero

For this feature, when a bulk wine is measured down to zero volume and it’s the last component in the batch, vintrace now prompts users to do one of two things with the remaining cost amount:

  • Write off the cost
  • Transfer the cost to an active wine batch

How to write off the cost

Step 1. Setup a Write off account.
You can setup you own Write off account or you can use the default Write off account that is already provided. In this example, a new Write off account with name “Write Off Account” is setup; type must be set to Write Off.

Setup Write Off Account

Step 2. Configure a Reason for Loss to link to your Write off account.
Navigate to Winery Setup – Production – Reason for Loss and click on New Loss Reason button. Enter Loss Reason and select the Write off account configured in step 1.

Loss Reason

Step 3. Measure down a bulk wine to zero.
Let’s take for example that you have a bulk wine “BCFL100” that you want to measure down to zero but it has existing cost and you want to write off the cost. From the Product Overview, click on OperationsMeasurement.

Operations - Measurement

In the Measurement screen, enter 0 in the Amount field and click on the calculator icon to calculate the Loss amount. In the Loss Reason field, enter the Loss Reason you have setup in step 2.

Measure down to 0

Click on Now+Save button. And then Click on OK button in the confirmation dialog.

Confirm measure to 0

In the warning message, click on Write off button.

Warning - write off

In the next warning screen, you are prompted to confirm the account to use for the write off. By default, the Write off account you have setup for the Loss Reason you selected for the Measurement operation will be selected. Click on OK button.

Warning - select write off acct

How to transfer cost to an active product costing
You can transfer a cost to an active costing such as packaging operation, or a transfer operation (transfer to a different batch) that was previously done on the batch.

Before you start, make sure you have a Write off account and Reason for Loss already configured as per step 1 and 2 in How to write off cost.

Step 1. Make sure that the batch you want to measure down to zero has an active costing. In this example, the batch “bcfl002” has an active cost that was due to a Packaging operation previously done.

Active packaging cost

Step 2. Measure down a bulk wine to zero.
From the Product Overview, click on OperationsMeasurement.

Measurement - transfer

In the Measurement screen, enter 0 in the Amount field and click on the calculator icon to calculate the Loss amount. In the Loss Reason field, enter the Loss Reason you have setup. In this example, “Transfer Cost” Loss Reason has been setup and selected.

Measure down to 0 - transfer

Click on Now+Save button and then click on OK button in the confirmation dialog.

Confirm - measure to 0 - transfer

In the warning screen, click on Transfer button.

Warning - transfer

In the dialog that pops up, click on the costing event for the stock item that was used in the packaging operation.

Select transfer costing

If you go to the Costs tab of the stock item involved in the Packaging operation where the costs have been transferred, you can see that the cost from batch “bcfl002” has been transferred.

Cost transferred to stock item

 

 

Costs tab added to Product Overview

The costing information for a bulk product has been moved to its own tab under the Product overview window. This information available has been expanded to show a running total, average unit costs, historic cost events, as well as a pie chart.

New columns to the Running cost show a $ amount per gallon or litre and a $ amount per vessel versus the $ amount for the entire batch of wine.

The historic cost events table also shows a running balance of cost changes and a breakdown of individual cost items; for example the cost impacts of individual components within a bottling operation are shown line by line.

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Costing included in the Bulk stock report

Costing for you bulk product has been included in the Bulk Stock report located under Reports – Management (bulk wine).

For the costing information to display you will need to change the Format option to CSV to view the data in Excel. Unit cost and Total cost are displayed by default. Select the Breakout costing option for a more detailed breakdown of costs for each bulk product.

Bulk Stock Report - new

For more information on other costing reports, click here.

 

Topping without updating wine composition

Please note: this article explains how you can use vintrace to track topping without updating a wine’s composition; you should understand that using this method of tracking topping jobs could conflict with your government’s / region’s particular reporting requirements.  You will need to determine if you are allowed to track topping operations in this manner. Please consult with your Compliance officer or your state’s Alcohol control board.

While the multi-topping operation in vintrace helps streamline your topping work orders, there are some wineries that might not prefer to have the composition of the wine they are topping into updated as in some cases it will lead to tracking very small percentages that only have a negligible impact on their wines.

Rather than use the multi-topping operation, you can achieve a similar result by setting up a Topping treatment under Winery Setup – Treatments – Treatment (Product).  Set the name to “Topping” and check the “Wine/Juice” box (for the “Applies to” field):

Now, instead of using the multi-topping operation, you can record a topping as a treatment and select Topping from the treatment list.  This can be done for an individual barrel group, or you can create a work order for multiple barrel groups from a Product Search (search for the wines you want to top, highlight them then select “Work order” – “Treatment (Product)” from the options under the search form:

vintrace will then ask you which type of treatment you want to use for the work order.  Select Topping from the drop-down list then click OK.  This will create a work order with a topping job for each of the wines in your search.  Just complete the job like you would any other treatment operation in vintrace.

This will show up in the history for each of these wines as a Topping.  There are reports such as the Operation Throughput report that will also allow you to filter on the treatment type if you need to look at all wine lots that have been topped in a period.

The last step is depleting the level of wine in the tank / barrels / kegs that you used as topping material.  Here you just need to record an adjustment against the vessel, and select an appropriate loss reason (such as Evaporation, or a custom Topping reason).

One thing to consider from an accounting perspective here is that the cost related to the topping material will not flow through to the destination wine automatically.  You can either spread a topping cost across all your wines in barrel at the end of the month using our Overheads Console.  Another option could be to assign a nominal cost to the topping treatment which will move to the wines you are topping when the treatment is performed.

How do wine losses such as topping or evaporation impact a wine’s costing (COGS)?

We track the total $ value across the whole lot.  When a loss occurs the $ value stays constant.  So the $/gal calculation will increase because the gal is decreasing.

So let’s say we have two wines:

LotA       $1000    100 gal  $10.00/gal

LotB       $2000    100 gal  $20.00/gal

Step 1) Let’s say LotB has an evaporation loss of 5 gal, you end up with:

LotA       $1000    100 gal  $10.00/gal

LotB       $2000    95 gal     $21.05/gal

(note for LotB there are 5 gal less, but the total $ value remains the same)

Step 2) then you top LotB with LotA

LotA       $950       95 gal     $10.00/gal

LotB       $2050    100 gal  $20.50/gal

(In this example, a $ value based on the current $/gal from LotA is transferred to LotB as part of the topping).

Both of these steps occur within the one transaction when topping.  But if you had a general racking / filtration loss, you would just see Step 1 where you have the same $ value across the lot, but the gallons decrease by the loss amount (which leaves you with a different $/gal value).

We have a report under Reports > Management (bulk wine) > Wine/Juice Costing which details the changes in total $ value, $/gal etc when a significant event occurs for a lot.

How do I add costs to fruit over and above the cost per tonne

So you have some costs associated with a parcel of fruit over and above the cost per tonne, for example you purchased the fruit from a Grower but made you own additions in the field and you want to see these additions categorized separately in the resulting wines you produce.

As is frequently the case the ‘cost’ of these actions are unknown at the time the fruit comes in and by the time they are confirmed the fruit has been crushed or pressed and is often in a number of different wine batches.

The goods news is you can add these costs to the delivery record and they will automatically flow through to all the current wines that contain some product originating from the delivery.

Do this by following the how to on adding fruit costs after the delivery but when you get to the Adjust costs screen enter the new costs into the Additions field. Note this screen updates the costs and does not add to them so if you have any costs in any of the fields make sure you leave them as is so as to not change costs already entered.

Once you new costs are in click Save and they will be proportionally spread across all the wines that originate from this fruit parcel.