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some flexibility, though. Depending on how they’re used and reused, they can be written off after a single use or they can be depreciated as equipment if they’re getting reused. “Some people look at it as, 'It’s equipment no different than the tanks.' Some people look at it as, 'The barrel is used up, so to speak, in the process of making a bourbon.' Some people say, 'We're going to sell the barrel for 100 bucks at the end, so I'm gonna add the cost of the barrel minus $100 to the proof gallons that are in that barrel for however many years,’” he said. “Your barrel is part of your ingredient mix. I add a barrel. We bottle it. I throw away the barrel. It's no different than adding your botanicals and throw away the botanicals when you're done. If you can sell botanical remnants for 100 dollars, it's literally no different than your barrel. “The distillery that I have, we do solera aging. So we're using a combination of new and used barrels. So I look at it more as an equipment thing. We’re going to use that barrel for a number of years and then we'll get rid of the barrel. The barrel, it's cost, isn't really directly related to what's in it because it's not a one-time use thing like it is with bourbon. So those sorts of unique conditions to your business help you set the policy of how you do your accounting for it. “It is just like other businesses. It isn't really unique in distilling. Accounting is pretty subjective until you set the rules. Then you just follow that policy that you established for your distillery.

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Choosing an accountant Naturally, it’s important that whoever a distillery relies on, whether it’s an in-house accountant or someone in an advisory role, understands the nuances of how the product evolves and is accounted for. “My biggest recommendation to all business owners: not just distilleries, never take business advice from a tax accountant, because that's an entirely different type of accounting that has no relevance to how you establish the costs of what went into your bottle at the end of the day,” Chew said. “All they're interested in is revenue minus expense, and this is what you owe in taxes. If they're not doing your taxes, you're in the wrong place. “You really need an advisor who understands cost accounting in some way if you're going to do production numbers or cost estimates of any scale that need to be pretty accurate for you. I would start with somebody that has knowledge of distilling. I would then go to somebody who has knowledge of cost accounting and I would then go to somebody who has knowledge of business accounting and advising on how to create a successful company.” A specialist in distillery accounting isn’t absolutely necessary, though. Chew recommends finding someone who has worked in an industry that involves a liquid product, whether beer, soda, juice, milk, or anything similar. “The benefit of the beverage industry is they're used to dealing with fluids, as opposed to assembling products out of widgets or kitting things together or something like that. It's much more of a fluid concept, so I

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Artisan Spirit: Summer 2018  

The magazine for craft distillers and their fans.

Artisan Spirit: Summer 2018  

The magazine for craft distillers and their fans.