9 questions every winery owner should ask their accountant

Executive Summary

Before you dive into the details, here are the nine questions every winery owner should be asking. These will help you focus on key issues and quickly determine if you are getting the information you need to make timely decisions about your winery.

The Questions

Are we capitalizing the right costs into inventory?

Are we using the correct method for tax and book inventory?

Are we taking advantage of all the tax benefits available to wineries?

Do we understand our gross margin by sales channel?

How are we tracking wine losses and blends?

When are we recognizing revenue and expenses?

Does our chart of accounts reflect how a winery operates?

Do our systems support accurate, timely reporting?

Are we showing this year’s vintage costs on the P&L without overstating expenses?

Full Article

Winery accounting is different, some might even say complicated (or worse.)

If your internal team or outside CPA is treating your winery like a typical product business, you could be missing critical information or making decisions based on the wrong data.

Whether you're preparing for tax season or just trying to get a clearer picture of what's happening in your business, here are nine questions you might want to ask your accountant. You don’t need to know all the answers, but you do need to understand critical decisions that might be impacting your results.

1. Are we capitalizing the right costs into inventory?

Wine inventory is more than what ends up in the bottle. Costs like grapes, winemaking materials, and packaging should be included—but so should a portion of labor and overhead, depending on your accounting method.

Ask: Are we applying consistent rules for what gets capitalized and what gets expensed?

2. Are we using the correct method for tax and book inventory?

Tax rules often allow wineries to use the NIMS method (Non-Incidental Materials and Supplies), which is more limited than full absorption. Book accounting usually requires broader capitalization. For tax purposes, wineries may also elect LIFO or FIFO, each with different impacts on taxable income and inventory valuation.

Ask: Are we clear on which method we are using for tax versus management reporting? Have we considered whether LIFO or FIFO is the right fit for our winery?

3. Are we taking advantage of all the tax benefits available to wineries?

Tax law offers several opportunities that are often missed when teams don’t consider how tax rules apply across the winery lifecycle. From accelerating certain inventory-related deductions to exploring whether farming or winemaking activities qualify for the R&D credit, proactive planning can strengthen cash flow and reduce surprises.

Ask: Have we identified all tax benefits available under current law? Are we accelerating allowable inventory deductions? Have we evaluated whether any winemaking, farming, or production activities might qualify for the R&D credit?

4. Do we understand our gross margin by sales channel?

DTC, distributor, tasting room, wine club—each channel has its own cost profile. Blending them together makes it hard to know what’s really working.

Ask: Can we see margin by channel, not just overall sales? Does our accounting software allow us to track that accurately?

5. How are we tracking wine losses and blends?

Between evaporation, transfers, and blending, volume can move and so can costs. Without a clear system, you can easily lose visibility.

Ask: Do we have controls in place to track gain and loss percentages and where wine is moving?

6. When are we recognizing revenue and expenses?

Revenue should line up with when the wine actually ships—not when the order is placed or charged. Timing matters for both accuracy and cash flow. Expenses should be recorded when incurred, regardless of when they are paid.

Ask: Are we properly accounting for prepayments, club orders, and fulfillment timing and vendor and contract terms?

7. Does our chart of accounts reflect how a winery operates?

Generic labels like Supplies or Labor aren’t enough for winery-specific decisions.

Ask: Can we break down costs by area (farming, production, bottling)? Are we tracking by vintage or varietal?

8. Do our systems support accurate, timely reporting?

Good decisions require good data. Waiting until year-end to clean things up makes it too late to course-correct.

Ask: Are we reviewing inventory, margin, and cash flow monthly? Are our tools up to the task?

9. Are we showing this year’s vintage costs on the P&L without overstating expenses?

You want visibility into how much the current vintage is costing—but you don’t want to hit your bottom line with costs that haven’t yet become cost of goods sold.

The solution: Track farming, cellar, and bottling costs on the P&L, then zero them out monthly by transferring those costs into inventory:

Bulk wine inventory if the wine is still aging
Bottled wine inventory if bottling occurred during the period

Ask: Do we show current farming and production activity on the P&L (so we can monitor them) but transfer these costs into inventory monthly so profitability isn't distorted?

Conclusion

You don’t need to be an accountant to ask good questions about your winery business. If the answers don’t give you confidence, it may be time to take a closer look at how your accounting is supporting your winery.

Need a second opinion or training for your teams? We help winery owners and their teams gain clarity, improve margins, and make better financial decisions. At the same time, we help winery accountants better communicate financial information to leadership teams.