Press-Republican

January 1, 2012

Future planning starts now

PETER HAGAR, Cornell Ag Connection
Press-Republican

---- — As we celebrate the end of 2011 and the beginning of a new year, we are fast approaching the time of year that most of us dread … tax time. While many of us are waiting patiently for the W-2 form to arrive, farmers don't have it so easy.

Because many farms are single proprietorships or family partnerships, they are essentially self employed and have no one but themselves to keep track of income and expenses. Besides that, many farmers also must do payroll and withholding for employees.

Like any business, an important part of farming is record keeping, data collection, organization and financial planning. That does not mean stuffing every expense receipt, check stub and bill from last year into a shoe box with faded notes and well-weathered deposit slips.

Organizing your paperwork can be as simple as a cardboard banker's box and a set of alphabetized hanging file folders.

Good record keeping is essential to determining whether your farm business is successful or not. And not just at the end of the year. A good system will allow you to keep track of how your business is doing at a glance.

One of the first steps one should take is to use a farm business account book to track expenses and receipts. A step up from there would be to utilize small business management software to computerize and modernize your farm record keeping. Some programs have farm and ranch business accounts already set up and ready to go.

With computer business management software, important information such as profit and loss statements and cash flow projections can be accessed at any time of the year, not just at tax time. Some programs will also do payroll tax calculations and withholding.

Tracking income is a challenge no matter what kind of farming enterprise you have. Dairy farmers have a major source of income from milk sales but also have income from livestock sales, feed sales, government payments and income from rents or custom field work.

Many smaller diversified farmers have multiple sources of sales income and expenses as well. With many sources of income comes the possibility of record-keeping lapses. Keeping farm income and expenses separate and distinct from personal accounts is also essential.

Tracking farm expenses is often the most difficult record-keeping challenge. The larger farm suppliers may supply monthly or annual statements, but it is often the little things that fill up the shoebox.

Regular filing and data entry, whether it is paper or computer, will keep your pockets, glove compartment and truck cab free of the sales receipts and charge slips that accumulate like leaves in autumn.

There is nothing worse than trying to read a receipt that has been sitting in the sun on your dashboard all summer. The time spent on these record-keeping details will save time and no doubt money when it comes time to balance the books.

Cornell Cooperative Extension has several resources to assist with farm business record keeping. The Cornell Farm Account Book is a pre-formatted account book with categories common to agriculture and additional areas for yield and capital asset data.

It is easy to understand and the information is well laid out in case you need to access it later. The disadvantage is that it is still a hand-entry accounting system, so entering farm information may take several hours per week.

Additional resources such as the Inventory and Depreciation Book, a Farm Business Record Book and Farm Employee Wage record books are also available for a small fee from Cornell Cooperative Extension's Clinton County office in Plattsburgh.

For information about proper farm record keeping or assistance with computerized record keeping, please contact me at 561-7450 or email phh7@cornell.edu.

Peter Hagar, agriculture program educator, Cornell Cooperative Extension Clinton County, 6064 Rt. 22, Plattsburgh, 12901. Call 561-7450.