Systems to improve your bottom line
You can’t manage what you don’t measure. This common saying is especially true when discussing farm records.
"The key is to use your financial and production records together to provide useful information when decisions need to be made."
"Record keeping can be time-consuming, tedious and complex," says Kevin Herbel, Kansas Farm Management Association program administrator. "But a good set of farm records is invaluable."
He says young farmers, especially, can benefit from collecting and regularly reviewing these financial data points. A complete and updated set of farm records, which should include production, inventory, legal data, finances and other information, can help you evaluate your business’ performance, compare your business to others and better plan for the future, Herbel explains.
Dale Nordquist, University of Minnesota’s Center for Farm Financial Management associate director, agrees with Herbel.
"After farmers begin to really take control of their finances, they can’t believe they ever operated by the seat of their pants in the past," Nordquist says. Once you’ve made good record keeping a priority, there are a lot of computerized systems that can help.
In choosing the right system, Nordquist says you should ask yourself two questions:
- Do you want a simple bookkeeping system, a more advanced accrual accounting system or something in between?
- Do you want a system that is designed for agriculture or a more generic accounting system?
You must find a system you are comfortable with and can understand, Nordquist says. Ag-specific systems usually offer the advantage of tracking physical quantities in addition to dollars. "The key is to use your financial and production records together to provide useful information when decisions need to be made," he says.
Back It Up. While it seems simple, be sure to back up your records.
Herbel says most of these systems offer a default backup of your information. "Just be sure the backup location is not on your hard drive," Herbel explains. "Then if your computer crashes, you will still be able to access your backup files."
External hard drives are a good option for backing up files. For a fee, many of these programs also offer the ability to back up your files to the cloud environment.
Pick the Perfect Program
Kevin Herbel, Kansas Farm Management Association program administrator, shares the pros and cons of common record-keeping systems.
Quicken: This low-cost program lets you import bank statements. It memorizes vendors and can be used to reconcile accounts. The program offers built-in reports but is not farm-specific and only lets you perform cash-basis analysis.
QuickBooks, QuickBooks Pro: This more expensive option has several features and tracking abilities. You can create accrual reports and track payroll/business records. Like Quicken, it offers built-in reports but is not a farm program.
FarmBooks: For farm accounting, this program has built-in reports and allows you to manage inventory, enter physical quantities, generate invoices, track bills and write checks. It also lets you create accrual reports.
- September 2013