Farm management and accounting records are vital to running a smooth operation. Management decisions are based on financial resources and records as well as crop data, equipment maintenance history, taxes and labor issues. There are different issues that need to be recorded in a number of ways so that information to make an important decision is always on hand and accurate.
Farm Accounting for Taxes:
Farms have income from many different sources including crop sales, government subsidies, and custom work done for other farms. Good accounting practices will account for each source of income and provide tracking of expenses for tax purposes. This information is necessary for filling out the Schedule F for the 1040 Personal Income Tax return.
No business can survive without understanding its bottom line. Decisions on expansion, downsizing or holding course depend upon the farm’s cash flow. To be able to make management decisions, the farm’s accounts must be current. This can help the farmer to understand the risks of a new undertaking versus changing vendors to save on shipping costs. Almost every decision pertaining to a farm is reflected in the bottom line of profitability.
Farm Management and Accounting Records for Equipment
Farms can have just a single vehicle or an entire fleet of specialty trucks and tractors. Equipment must be maintained so that it is ready to go to work when needed. Scheduling routine maintenance and keeping records of oil changes and breakdowns can help a farmer realize when a piece of equipment is worn out and needs replacement rather than spending several thousand dollars in repairs.
Farm Management for Dairies
Management of a herd of livestock requires record keeping on each animal. In the dairy industry, records are kept on each cow, including the amount of milk she produces and when she is sick, when her last calf was born and when her next calf is due. This information helps dairy farmers identify animals that are not producing and need to be culled. Records can also show cows that are producing above average so that breeding and retaining calves from those cows will increase the dairy’s overall milk production.
Farm Management for Beef
Herd management is also necessary for the beef industry. Cows are judged on the quality of calf they are raising, whether the cow had a calf, inoculations and growth rates of the calf. Bulls of low birth weights are selected to breed with cows that have never given birth to help ensure an easy birth. Calves are also monitored for health, growth, and food to weight-gain ratios.
Farm Management Crop Records
Farms may have several different fields with different crops growing. To protect the soil, farmers must rotate crops on a regular basis. Farmers will use crop records to see which fields produced the most tons and which seeds from stock produced the best crop for their areas. Fertilizers and irrigation are also part of the crop records farms keep for good management.
While many of the farm management and accounting records may seem redundant, the necessity of tracking everything from equipment maintenance and animal production helps the farm to know which animals need to be culled and how to plan for future crop planting. Careful accounting of finances provide the farm with the ability to make decisions and to ensure reporting taxes and to other government entities is complete and accurate.
Internal Revenue Service: Agriculture Tax Center
Pennsylvania State University: Record-Keeping: Essential to Risk Management
Missouri State University: Agriculture Risk, Farm Business Plan, & Financial Management