If you are just starting your farm operation, there is a lot to consider, but the key to any successful business is making sure you know exactly what income is coming in, and what payments are going out. Of course, you cannot balance this all in your head, so it’s important to keep a record of everything to maintain the well-being of your operation.
Do It Often
Don’t be the person who collects a shoe box of receipts all year and tries to manage your finances all at once at the end of the year – that’s a headache waiting to happen. Instead, set time aside routinely to track your expenses and what money you are bringing in. It’s recommended you do this at least every month, if not more often.
Hiring an accountant to handle your finances can make this process much easier and allow you to stay focused on the work you truly enjoy – the farm.
What’s In Your Record Book?
Depending on the type of agricultural business you are operating, your record book may look different than another farm’s. As a basic starting point, your record keeping should contain things including:
- A column for each date of the year
- A record of your livestock (This will include information like the type of livestock, quantity, weight, and how many you have.)
- The income of your operation
- Your daily, weekly, and monthly expenses
- An inventory of your equipment
- Equipment repair costs
- Seed and feed costs
Method to the Magic
Record keeping comes in many forms. Most farmers decide to use computer programs like QuickBooks which help you keep track of everything in your records step-by-step. There are free options on your computer, too, like keeping a spreadsheet on Microsoft Excel or Google Sheets.
You may take a more traditional approach and handwrite your finances. GreenStone offers farm record books at our branches at no cost.
Helping You in The Long Run
Lenders need to see the entire picture to be able to help you. If you provide a lender with an income and expense sheet for an entire year that is incomplete or hasn’t been maintained in a timely manner, there may be income not accounted for which prevents lenders from evaluating an accurate picture of your financial situation. Lenders can only decide based on the information that is provided.
Additionally, if you keep track of your finances regularly, you or your accountant will be able to see taxable income far in advance to help avoid any large surprises come tax season.
Keeping track of your income and payments helps paint an accurate picture. Not only is it necessary to get the financial assistance needed, but regularly evaluating your records is an important step in managing your business and uncovering opportunities to improve practices and efficiency.
You Know How You’re Doing
Outside of tax and accounting purposes, regularly keeping track of your finances is important for your own peace of mind. When you know how financially healthy your business is, you can sleep easier at night.
Additionally, when you know you are ahead and have a healthy financial situation, you can better plan, like new equipment purchases and expansions for your business – and that’s a good feeling!
GreenStone is always ready to help you get started with record keeping! GreenStone offers tax and accounting services for all sized operations – whether you need assistance for one tax season or all year long. Reach out to your local branch or 800-444-3276 today.
This article was originally featured in Michigan Farm News.
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