Running a farm is a lot of work, especially when it comes to managing your books and your day-to-day finances. With so many elements to keep track of, it can be easy to lose sight of certain financial statements, making it difficult to accurately track your expenditures and profits. This can reduce your earning potential while making it difficult to maintain accuracy for tax reporting purposes. As leading providers of bookkeeping solutions, the team at Leskun & Son Accounting understands these challenges. That is why we have compiled a list of 4 bookkeeping tips for farmers to help maximize earning potential while ensuring optimal accuracy and tax compliance.
What do monthly bookkeeping services cost for farms?
4 Tips to Help Farmers Optimize Their Bookkeeping
The following tips can help farmers accurately manage their finances for their business:
1. Keep Your Incoming Payments and Debt Separate
Dairy farms, chicken farms, and other operations commonly utilize loans to purchase new equipment and enhance their productivity. With so many moving parts, it can be easy to lose track of what money is yours (revenue) and what needs to be paid back (debt). This can lead to severe financial issues down the line, so it is important to use financial software or dedicated bookkeepers to keep your revenue and debt separate.
2. Understand Depreciation
Every farm utilizes a variety of equipment and facilities to perform daily tasks. From tractors to silos, the value of your equipment will inevitably fall over time. Your equipment costs can be offset against tax payments, meaning the total cost of the asset can be written off over its usable life. You will need to calculate depreciation and claim deductions every year, so it is important to understand how depreciation works.
3. Think About Seasonal Cash Flow
When it comes to crop production and livestock, your farm will likely deal with seasonal highs and lows. While your farm may thrive during spring and summer, it may be significantly slower during autumn and winter. When you are generating less revenue, you should be spending less to ensure that you are not using funds that you do not have. Always take the time to predict how your cash flow will fluctuate over the year and determine when you should expand or consolidate.
Learn more bookkeeping tips for your business.
4. Partner with a Skilled Team of Accountants
From growing crops and handling livestock to maintaining equipment and repairing facilities, farmers have a lot of work to handle. If your schedule is already full, consider outsourcing your bookkeeping to a skilled team of professional accountants. This will allow you to focus on your day-to-day tasks while ensuring optimal financial organization and tax compliance.
Learn about the benefits of outsourcing bookkeeping for your farm.
To learn more about bookkeeping or to inquire about our accounting and tax services, get in touch with the team at Leskun & Son Accounting. We can be reached through our online contact form and will be happy to answer any questions you may have.
