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November 21, 2017 by Denver Nicklas

How good records benefit your farm

Even if you run a successful farm business, there is probably room for improvement in your record-keeping. Good records provide a snapshot of your operation and a more precise sense of where your business is throughout the year.

If you are in a situation where you can’t find the numbers or information you are looking for concerning your business, there is a good chance your farm records are inadequate. If a bank asks to see a six-month financial statement and you can’t quickly generate one, you need to take measures to improve your farm records. Simply collecting receipts in a box is not enough. With that in mind, here are four suggestions to help you improve your farm records and reap the rewards of this improvement.

1. Stay on top of your bookkeeping

Bookkeeping should always be entered in a timely manner. Our clients who have good bookkeeping do it at least once a month. If you let six months pass without any updates, there is a good chance you will miss something. If you forget to enter expenses, your income will be overstated and you will end up paying more tax than you should. Of course, this could also go the other way. Deposits could be missed, causing you to understate your income and overlook tax payments.

2. Do a monthly bank reconciliation

If we find good records are not being kept, we usually suggest doing a monthly bank reconciliation. In this process, you take your bank balance and compare it to what you have entered in your accounting system. This tells you if anything has been missed or is outstanding for a long period of time. When we recommend people complete those on a regular basis, their records improve dramatically. Aside from cash transactions, all transactions go through the bank, giving you a reliable record of what you have deposited and withdrawn. When you compare that to what you have entered in your system, you will be able to see any discrepancies.

3. Establish your cost of production

If you are a cash crop farmer, it is important to establish your cost of production –  what it costs to plant an acre of soybeans, for example – as this gives you a better sense of the price you need to sell your crop for in order to make a respectable profit. In the process, you might also discover opportunities for savings.

4. Track births, deaths and fertilizer used

If you aren’t currently tracking births, deaths and fertilizer used, you may not think this is worth the effort. However, like many other areas of farming, the rewards for this tracking will always be proportionate to the effort expended. If you spend a great deal of time making sure all this data is collected, you will make wiser, more informed decisions about your business. But if you fail to collect this data, it is difficult to go back and do the necessary tracking effectively.

Reap the rewards of good records

If you are still skeptical about the value of keeping good records, there are several benefits to note. For one, having good records makes is easier to complete applications for government farm programs like AgriStability and Farm Risk Management. In addition, the better your records are, the more accurate your budget will be for the year ahead. Plus, there are undeniable savings to be had. If your records are in good shape, your accounting fees are likely to be lower. The more work that needs to be done, the higher your bill will be.

Denver Nicklas is a senior accountant at Collins Barrow CK, LLP.

Meet the Author

Denver Nicklas Denver Nicklas
Chatham, Ontario
D (226) 830-0103
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