The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
TEPAP - Day 1
Jan 09, 2011
All this week I am at the The Executive Program for Agricultural Producers (TEPAP) in Austin, Texas. This is an all week intensive program put on by the Texas A & M University and hosted by Danny Klinefelter. I am very excited to attend the program and will try to post at least one blog post each day on what I have learned or felt our farmers should be aware of.
Sunday, (today) was the first day and Dick Wittman of Wittman Consulting did a great job of providing an overview of why farmers "must" use accrual farm accounting to have an accurate view of their profitability and other pertinent financial ratios. There were a couple of bankers attending the program and I was talking to one later in the day and I asked him how many farmers are using accrual accounting. His guess was about 1% of his clients were. I then asked if using accrual accounting was important and he indicated it was very important.
Another thing that Dick stated that I thought was informative was that most of our farm bankers are already taking your cash basis income tax returns or financial statements and converting them to an accrual basis. If you have been with the same banker for many years, the banker will generally have these statements for each year and they will readily give this information to you. This could save you many hours of research and give you a good start on setting up your accrual statements.
Management succession consultant Dr. Donald Jonovic (you probably have read many of his articles or books already) provided a very humorous presentation on the interaction of farm families and the issues associated with farm succession.
One important nugget was to understand that their are three major components to a farm business:
Each of these roles interact with the others to some degree and when they do interact, this can be the time when the most conflict may occur. All of these components may involve all of the parents and children associated with farm, but it is important to keep the communication on these subjects timely and separate. The meetings may happen on the same day, but the agendas and discussions must be separate from the other. Also, what happens in the past stays in the past. What is important is to focus on the current and what you can do to make the future better.