Record keeping for the ranch
Record keeping. It’s been compared to sitting in a dentist chair or cleaning the bathroom. It’s a chore that is often put on the back burner in lieu of more important tasks on the ranch like chores, baling hay and fixing fence. Yet, record keeping is one of the most important keys to success in any operation, said Mary Held, a farm loan officer with the Farm Service Agency (FSA).
Held was one of the speakers at the Ag Women’s Day held on June 15, 2010, where more than 70 women met to listen to presentations on crop and livestock insurance, estate planning, gardening, grilling, and more.
Held recognized that women in agriculture are often placed in the role of bookkeeper, so she offered some sound ideas to consider for getting the job done and maintaining accurate records for the operation to reference.
Three copies, three reasons
So, why should producers keep records anyway? And, how often should I maintain and keep these records? These were the questions posed by Held to the group of women at the agriculture meeting.
“You need three records on hand, one for you, one for the banker and one for Uncle Sam,” said Held. “Try to start your records at a consistent date each year. Don’t wait until the end of the year to get started.”
With three solid reasons to keep records, Held said the first benefit is that records will help producers prepare their tax returns.
“With income tax reporting, documentation is critical,” said Held. “Keeping a balance sheet to show what is owned and owed, results in understanding your net worth. It’s also your responsibility to track your income, as well as your expenses.”
The second benefit of keeping accurate records is to help obtain credit at a financial institution. Records indicate to the lender that the operation has a clear goal in mind, with a structured outline of how the business will make money.
“When going to see a banker, bring your balance sheet to show your cash flow,” recommended Held. “There is a growing number of producers who are land-rich and cash-poor. Yes, there are a lot of dollars in the operation, but if there isn’t enough left to pay the bills, the banker is going to be hesitant to lend you additional money.”
Finally, the best reason to keep records is for the growth and benefit of the operation, said Held.
“Records can be used as a management resource for producers,” explained Held. “Records monitor progress of the business and determine the need for change in the future. Maybe we need to modify things in the operation. By looking at our records, we can make those adjustments; however, without records, we would probably continue to do the same things year after year.”
Tips and tricks for record keeping
What should a good record keeping system included? Held offered her ideas on this topic.
“A good system should be simple and should be appropriate for each unique operation,” recommended Held. “It should provide essential information on a timely basis, and it needs to include income, expenses, and capital purchases, for both farm and non-farm items.”
Held said she often wishes that non-farm family living items were tax deductible, not so producers could write these thing off, but because many would be surprised to discover the true costs of their families, and would find ways to tighten up in that area, in order to really help the operation. She reiterated that record keeping is one of those important tools and is something that should be maintained.
“Record keeping is a task that should be done each week,” advised Held. “Buy a binder with individual folders in it and put expenses, receipts and sales for each month in that binder. When you have time, begin entering the items from each month into the computer and keep track with a paper clip which receipts have been added to the system. The more timely, the better.”
Held said one of the best and easiest record keeping systems is a free booklet offered by the FSA. Although it’s not a favorite task among producers, it’s an important one to keep the operation on track and moving forward.
Record Keeping Tips Photo:
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User