Why Is Good Record Keeping Important to Successful Farm Management?
As we start the new year, there are goals and resolutions that we hope to achieve. One common task that I would encourage producers to start or fine tune is the chore of record keeping. Present-day farm operations are becoming more and more business oriented than yesterdays farm operations. Being a good producer is no longer good enough to remain in business. The key to becoming a successful farmer today is being a good producer as well as a good financial manager.
The first step in being a successful farm manager is keeping good, accurate records and establishing a sound record-keeping system. There is a misconception that the only reason a person needs records is so he or she can report their taxes. However, record keeping plays a much larger role in business. Farming is a business and records can be helpful in planning improvements for that business and making proper management decisions.
Farm managers need a complete and accurate farm records system in order to make informed management decisions that will help maintain or improve farm business profitability. Records can help the manager plan and implement farm business arrangements and do estate and other transfer farming. Also, farm managers can use records to determine what the efficiencies and the inefficiencies are, measure progress of the business and plan for the future.
There are many farm record systems. They range from simple, hand accounting systems using pencil and paper to sophisticated double-entry computer-accounting systems, which require computer operations. Some require a mix of hand and computer operations. Choose a system that is easy to understand and designed specially for farm managers. It should not only meet the accounting and planning needs of the farm operation, but it should also satisfy income tax, legal, and other outside reporting requirements.
The first step is to determine your objectives for the system – both personal and business. For farm managers who do not want or need a system for business and financial management, a relatively simple system that satisfies income tax reporting requirements may be adequate. For those who are heavily in debt or who want to improve profitability, a more complete and detailed system is probably required.
Remember a good record-keeping system is one that will provide the necessary information and provide the information when needed. It will furnish the necessary information for understanding the activities of your farm operation.
NC A&T University Cooperative Extension