Out of Sight, Out of Mind?
Why winery owners need to check in with service providers
As a winery owner, you have the option to outsource a number of business services. There are local experts who can take on many of the mundane chores that can keep an owner awake at night. There are both human- and technology-based compliance service providers, payroll management companies, and bookkeepers who can help you keep up with the myriad regulatory and accounting challenges of life in the wine industry.
However, outsourcing the work should not mean abdicating responsibility for reviewing and managing both the relationship and the end product created by these providers.
In no case does hiring an outsourced provider relieve you, the business owner, of ultimate responsibility for proper compliance, filing, reporting, or payment of any liabilities associated with an outsourced service.
Although not the norm, per se, there are enough cases of errors, misapplied payments, misappropriation of funds, and even fraud related to service providers of different kinds to take the threat seriously. After all, it only takes one incident to result in catastrophe. The cause is generally simple neglect (and sometimes blind faith) on the part of the hiring winery that creates an opportunity for the fraudster.
A recent case of fraud, which did not impact any area wineries, involved a New York-based and now defunct payroll provider, MyPayrollHR. This example is a timely reminder of our need to stay engaged with our service providers. Local payroll provider, Payroll Masters, is proactive about recommending their clients monitor their own accounts and stay connected with their team of payroll experts. Their new client on-boarding package includes a mandatory form for all client employers who sign up for their services, reminding employers of their ongoing liability for payroll taxes and offering links to Federal and California sites for verifying that electronic funds have been deposited on their behalf.
As a winery owner, it behooves you to work closely with each of your service providers. The majority of service providers are capable and reputable and will appreciate the opportunity to work with you directly on this.
Our rule of thumb is to trust but verify.
Here are some actions to consider in working with different service providers:
- Compare funding amounts (paid to provider) with amounts remitted by them to each taxing authority or agency and reconcile your liability each month.
- Verify the status of state licenses periodically.
- Ask for the following information by jurisdiction: Amounts collected from customers (should come from your point of sale system), remitted, and outstanding each month.
- Review information contained in your ShipCompliant application to make sure the correct sales tax rates and licensing data is being applied.
- Periodically review your software application settings to ensure that tax rate updates and licensing changes are current.
- At the end of each month, create a schedule that reconciles your sales tax liability account (on the balance sheet) to the balances shown by your compliance provider.
Payroll Management Services
- Review payroll reports by period, keeping track of amounts withheld and remitted.
- Validate benefit payments, like 401K contributions and health insurance deductions, to make sure they are being remitted timely.
- Make sure you (or your bookkeeper) are recording wages at the gross payroll amount, not net of withholding.
- After signing up for online payments at the IRS and California websites, review your deposit history. While the timing of deposits might not coincide exactly with amounts withheld, you should be able to match deductions with remittances.
- At the very least, review your winery financial statements. Create a month-by-month view of both your income statement and balance sheet and note any unusual amounts in each month, then talk with your bookkeeper about those items.
- Next, ask to see the bank reconciliation reports and look for outstanding uncleared transactions that are older than one year.
- Review the vendor list for any names you don’t recognize and examine key vendors for invoice handling.
- Many of today’s online accounting applications have a direct feed from the bank to your accounting software. While this saves time for matching and reconciling payments, your bookkeeper will still need access to bank statements at the end of each month.
- There are other “fetching” applications like HubDoc and Receipt Bank that can enable your bookkeeper to access statements without direct access to your bank account. Otherwise, create read-only access to your online banking for your bookkeeper if needed.
- If you see a large number of entries in Accounts Payable that are coded as “expense” transaction types in QuickBooks Online or Desktop, these transactions are being entered from the payment detail. This often means that original invoices have not been reviewed or attached. While this doesn’t indicate fraud, it could indicate coding errors on your financial statements or a need for better internal controls.
- Learn more about working with accountants at our upcoming class on November 12th.
The Bottom Line: Apply Caution, Not Panic
Relying on experts for assistance in specialized areas is an effective way to free up time to focus on other important winery tasks. But it is not an excuse for failing to review or supervise others who provide important services for your business. By maintaining open communication, establishing clear procedures, and monitoring reports and payments, everyone will be in a better position to do their best work, and you are free to focus on other aspects of your business.