At a high level, WS is designed to be your GAAP-compliant financial source of truth in the context of a manufacturing business. Tracking Material COGS is at the core of the financials, although Labor COGS may also be tracked in the system if desired.
WS employs a double-entry accounting system which tracks material/spirit costs from initial receipt through to bottling and sale. Best practices for distillery accounting require the additional use of full-featured accounting software (e.g. Quickbooks), which should inherit financial transactions from WS.
» If you have a tasting room, it's recommended that you use POS software to track tasting room inventory and sales. Those financials should also flow through to your over-arching accounting system of choice. Keep Tasting Room and Distillery books separate (one buys cases/bottles from the other) so that you can evaluate the performance of each business component separately.
Overhead Expenses like Rent & Utilities (and Labor, if not tracked in WS) should be tracked and assigned to your Inventory using the Overhead Allocation method under GAAP. Asset appreciation (e.g. of barrels in storage) should similarly be tracked outside of WS, in your accounting system of choice.
The following Venn Diagram illustrates best practices for accounting. Your accounting system of choice inherits journal entries from both Whiskey Systems and, if applicable, your Tasting Room POS software. Overhead expenses are added as journal entries to your accounting system of choice:
An example reconciliation exercise is available here: Financial Accounting: Example Reconciliation of QuickBooks (QBO) to Whiskey Systems (Read Time: 4 mins)
Frequently Asked Questions:
Q: I added a Finished Goods order to Whiskey Systems, but I'm not seeing the corresponding Financial Transactions in my ledger reports.
A: Orders must be marked as "Shipped" in order to generate financial transactions. Transactions will use the "ship date" (not the order date).
Depending on the tax status of the products being shipped, shipping an order can generate financial transactions in the following accounts: CostOfGoodsSold_Material, CostOfGoodsSold_Tax, ExciseTaxLiability, FinishedGoods.
Q: What about the invoice for that order? I'm not seeing the corresponding Financial Transactions.
A: Much like orders, invoices do not generate Financial Transactions until they are marked as "Approved" or "Paid". Initially-entered invoices with a status of "Open" do not generate Financial Transactions. This also applies to QBO "data push": only Approved/Paid invoices will be pushed. The Invoice Date in QB will correspond to the Invoice Date in Whiskey Systems - not the ship date or order date.
Marking an invoice as Approved or Paid will create a Financial Transaction that debits AccountsReceivable and credits Sales.
Q: What about Outgoing Transfer in Bond? What are the financial implications?
A: Debit to CostOfGoodsSold_Material, credit to WorkInProcess and debit to AccountsReceivable, credit to Sales. Unlike Finished Goods orders, the financial transactions for outgoing Transfer in Bond include the shipping transactions (COGS, WIP) as well as the invoice transactions (AR, Sales) at the same time.
Q: And what about Depletions from Bailment inventory? What are the financial implications?
A: Debits to CostOfGoodsSold_Material & CostOfGoodsSold_Tax, credit to TaxPaidFinishedGoods; debit to AccountsReceivable, credit to Sales.