As we set our goals for the New Year, we are reminded by our extension specialists to remember those goals towards keeping better records for production in 2014.
Steve Jones, associate professor and extension specialist for the Department of Animal Science at the University of Arkansas, said that major record keeping categories include feed, fertilizer, seed, mineral cost, fuel, livestock purchases and sales, sale commissions, trucking, and health/veterinary expenses. “These are examples of expenses/income that are directly related to production, sounds simple but often not recorded in a way that allows you to make management decisions in addition to tax preparation.”
“It is amazing the number of producers who keep a notebook of cow records, but never bother to divide their total farm income and expenses for the year by the number of cows on the farm or the number of calves sold,” said Joe Horner, extension economist for the Commercial Agriculture Program at the University of Missouri. “That’s really all it takes to get a rough idea of your true cash cost of production per animal.”
An example of a production related item to track is herd inventory. Herd inventory is essential so you can track the efficiency of you herd. “I recommend comparing everything on an Animal Unit basis (1000 lbs = 1 AU),” Jones said.
Jones recommended that each producer should start with a record system that makes sense to them and one that can be replicated every year for comparison. “A simple computer spreadsheet is a good place to start,” he added.
Horner recommended that producers track all production income and expenses, capital purchases and sales, and a list of cattle sold and which cull animals sold were bought versus raised animals.
“A key reason for collecting production and financial data is to understand the not-so-obvious,” said Mark W. Jenner, Ag Business specialist in Bates County. “We do a better job at casually tracking big ticket items: large expenses and large sales. It’s the smaller things: equipment maintenance, cell phones, time spent on maintenance and management that fall through the cracks. These under-recorded lesser costs are the difference between great and average management.”
Every farmer should complete a balance sheet at the first of every January. “A balance sheet lists what you own and what you owe, with the difference between the two being your net worth,” Horner said. “Having a file full of these over the years will be valuable if you ever need to prove your farming operation is building net worth over time, instead of just being a money losing hobby farm. Many farmers spend their farm into a negative taxable income every year to avoid income taxes. Unless you can prove the farm is building net worth over time, lenders, spouses and other stakeholders may not understand why you are farming.”
Most farmers find Quicken to be an inexpensive, fast, and simple farm accounting system, even though it was built for personal finance rather than business accounting, Horner said.
