Managing Your Inventory* *And Production to Ensure Financial Success Mary Brettmann, CPA Vickie Brennan, Investigator, TTB

Welcome We will be covering a lot of ground in this seminar. Our goals: Understand the basics of inventory Know where to get started Showcase cool tools for inventory and production

Inventory Huge Benefit, Huge Hassle Backbone of materials handling and forecasting Give everyone the same playbook Cost of mistakes grow with the company

What is Inventory? Keep track of everything that goes into the process Raw Materials Work in Process Finished Goods Keep track of what is sold Merchandise

How is inventory valued? Average Cost FIFO – First in, first out LIFO – Last in, first out Actual Cost Standard Cost

How do you do inventory? Physical count – worksheets, excel file Periodic accrual – Journal Entry balance based upon PI Perpetual accrual – System keeps its own balance

Possible obeer ipad count screen Ekos is working on the creation of an electronic signature.

Important Internal Controls Standards are important Regular electronic backups Proper sign off on the count worksheets Strong standard Operating Procedures are important both to maintain the accuracy of your system and to prove to TTB that your inventory count is accurate. As you grow, TTB will expect stronger SOPs.

TTB Definition of Inventory Requirements for Inventory

TTB Inventory Requirements Brewery – 27 CFR 25.294 Must be taken at least once each calendar month and must include: Data Taken Quantity of beer and cereal beverage on hand Losses, gains and shortages Signature, under penalties of perjury of the brewer or person taking the inventory (as defined at 27 CFR 25.11 Executed under penalties of perjury). Retain on premises, made available for inspection by TTB officer

TTB Inventory Requirements Distilled Spirits Plant – 27 CFR 19.623 Production and Storage Accounts and Processing Account (wines and bulk spirits) 27 CFR 19.312, 19.333, and 19.371. Must be taken at the close of each calendar quarter and must include: Date Taken The identity of the container(s) The Kind and Quantity of spirits, denatured spirits and wines Losses, gains, and shortages Signature, under penalties of perjury of the proprietor or person taking the inventory (as described at 27 CFR 19.45 Execution under penalties of perjury). Retain on premises, made available for inspection by TTB officer

TTB Inventory Requirements Distilled Spirits Plant – 27 CFR 19.623 Processing Account (bottled and packaged spirits) 27 CFR 19.372: Must be taken at the return periods ending June 30 and December 31. 5 business days’ notice must be provided to TTB designating the date and time of inventory. The inventory record must include: Date Taken The Identify of the container(s) The Kind and Quantity of spirits, denatured spirits, and wines Losses, gains, and shortages Signature, under penalties of perjury of the proprietor or person taking the inventory (as described at 27 CFR 19.45 Execution under penalties of perjury). Retain on premises, made available for inspection by TTB officer

TTB Inventory Requirements Winery - 27 CFR 24.313 Must be taken annually, typically June 30. Monthly report of operations filers may select another annual inventory period upon notice to TTB Quarterly report of operations filers must select an annual inventory period that begins on the first day of a calendar quarter and notice must be filed with TTB. Annual report of operations filers must take their annual inventory as of December 31.

TTB Inventory Requirements Winery - 27 CFR 24.313 The inventory record must include: Description of wine and spirits, including anticipated marketing identifiers such as vintage, varietal, or geographical designation Type of wine (if other than grape), i.e., orange, apple, honey, etc. Tank numbers. Barrels, puncheons, etc., containing the same kind of wine may be summarized by type unless marketing identifiers are noted. Cases, bottles and other similar containers – the total volume of one kind of wine may be entered as one item and appropriately identified.

TTB Inventory Requirements Winery - 27 CFR 24.313 The inventory record must include (con’t): Summary: The volume of bulk and bottled or packed wine must be totaled separately in wine gallons or in liters, by tax class, and reported (in wine gallons) on the next required Report of Wine Premises Operations, in addition to any spirits on hand. Signature on the last, consecutively numbered page, under penalties of perjury as described in 27 CFR 24.313€. Retain on premises, along with the Report of Operations for the period in which the inventory is taken, and make available for inspection by TTB officer. Losses or gains must be reported any time an inventory is taken and reported.

Tools for Inventory and Production Phase I reports What basic info can the system give me? Reorder Points Tank Utilization Once you trust your system, The Next Step is for it to Talk Back to You.

Reorder Point Alerts

Tools for Inventory and Production Phase II Reports What is the reality according to the system? Inventory Stock Status Report FUTURE Inventory Stock Status Report

Tools for Inventory and Production Phase III Reports Tell me what will happen based upon a forecasted reality MRP Module Use it for Purchase Order Generation High Level Forecasting Forecast a shortage AND a solution

Pointers for Taking the Next Step Count Early and Often Appoint Someone “Inventory Czar” Consistency is Key Be Curious Make Changes and Count Again

TTB Resources – https://www. ttb TTB Resources – https://www.ttb.gov (Tools/Tutorials, Virtual Seminars and Online Training) Common Compliance and Audit Issues: https://www.ttb.gov/beer/beer-tutorial.shtml#_Production_and_Inventory https://www.ttb.gov/spirits/common_compliance_tax_issues-during-audits-ds.shtml#_B.1_Inventory_Issue https://www.ttb.gov/wine/common_compliance_tax_issues.shtml#inv_1 Beer Regulations: 27 CFR Part 25 Distilled Spirits Regulations: 27 CFR Part 19 Wine Regulations: 27 CFR Part 24

Questions? Thoughts?

Thank You Mary Brettmann, CPA Beverage Business Builders mary@bevbizbuilders.com (714) 227-1443 Vickie Brennan, Investigator Alcohol & Tobacco Tax & Trade Bureau Vickie.Brennan@ttb.gov (513) 684 - 2473