If you want to dig deeper into the world of farm
business accounting or look for other record keeping
and organization systems that might improve your
operation, the following resources will be helpful:
Kansas State University offers a free 16 pg.
booklet entitled Farm Record Keeping With
The Kansas Farm Account Book that can
be downloaded at http://www.oznet.ksu.edu/library/
agec2/mf408.pdf, or ordered from Production
Services, Kansas State University, 24 Umberger
Hall, Manhattan, KS, 66506-3402; (785) 532-5830.
Ohio State University offers a complete manual
entitled Computerized Farm Record Keeping
on-line at http://ohioline.osu.edu/
b890/b890_3.html , or you can order it from
OSU Media Distribution, 385 Kottman Hall, 2021
Coffey Rd., Columbus, OH, 43210-1044; (614) 292-1607.
University of Missouri Farm Accounting
Resources, including the Missouri Farm
Business Record Book, the Missouri Farm Tax Record
Book, Quicken Farm Accounting Software, Quick
Books Farm Accounting Software, PC Mars Farm Accounting
Software, and other informational resources, can
be found on-line at http://agebb.missouri.edu/
mgt/mofar/, or ordered from UM Extension Publications,
2800 Maguire Blvd., Columbia, MO, 65211.
FINPACK, a computerized farm
financial planning and analysis system, made up
of FINLRB (long range business planning), FINFLO
(cash flow analysis), and FINAN (year end analysis),
gives you the tools you need to effectively use
your Quicken records in managing your farm. This
package can be found on-line at www.cffm.umn.edu,
or ordered from the Center for Farm Financial
Management, Dept. of Applied Economics, University
of Minnesota, 1994 Buford Avenue, St. Paul, MN,
55108; (612) 625-1964 or (800) 234-1111.
Farm Files is an agricultural
software package, “designed by a farmer,
for the farmer”, that can help you manage
crops, livestock, and accounting for your farm
that can be found on-line at http://www.farmfiles.com/
?source=overture/, or purchased from Choice
Technologies Inc., 921 2nd Avenue SW, Spencer,
IA, 51301; (888) 983-4402.
You can find a great listing of MANY more financial
software packages on line at http://www1.agric.gov.ab.ca/
Some Extension Offices and land-grant universities
offer classes on farm record keeping and accounting
(frequently inexpensive and sometimes free), so
be sure to check these resources!
If you want to find ways to get more generally
organized around your home or office, these resources
are worth a look:
Getting Things Done by David
Allen is an excellent, innovative book on personal
organization and time management. Though it is
geared toward traditional offices and 9-5 workers,
the principles can also be applied to the home
or farm office. It can be purchased through bookstores,
or via http://www.davidco.com/
Consider getting help from a professional organizer.
(Yes, believe it or not, there are people who
make a living helping other people organize their
files and clutter!) Services range from basic
filing to complete office reorganization and clutter
removal, all according to the kind of help you
want. To find an organizer in your area, contact:
be honest. Many people, including farmers, don’t
keep financial records. And even those who do keep records
do it reluctantly. Why? Probably because we assume that good
record keeping takes more time and organizational skills than
we think we have.
However, as a farmer, the truth is that you may already be
saving and organizing a lot of the information you need to
keep good records and develop useful cost information:
- Do you keep a bank account for your farm?
- Do you keep your farm bank account separate from your
- Do you keep your receipts from your purchases and store
them in one place?
- Do you write receipts from your sales and keep them on
- Do you enter your sales and purchase receipts into a ledger
(either on paper or on a computer)?
- Have you made a written inventory of your equipment and
supplies within the last two years?
- Have you made a written inventory of your products and/or
livestock in the last year?
If you answer “yes” to one or more of those questions,
then you already have the foundation of a simple, functional
record keeping system, one that can help you calculate your
It’s true! If you have completed any of those tasks,
then you have the skills (and most of the time) you need to
do one or two other tasks on that list. And those three or
four pieces of financial information, added together, can
help you figure out a large portion of your product costs.
After all, you have probably experienced the way that how
focused, organized training can create success on the track,
field, or other sports arena. Certainly your business and
livelihood deserve the same kind of focused, organized effort!
The goal of this fact sheet is to help you tap the
full value of your existing records (even if they’re
very simple) to determine product costs. Along the
way, you will also find a few realistic tips to improve your
records and organizational systems, which can help make your
cost calculations and business planning more manageable and
effective. You may even learn to appreciate and enjoy record
keeping more than you do now! However, let’s be realistic;
if you’re able to make the most of the records you already
have, that’s good enough.
Let’s also be realistic about the amount of information
and guidance we can provide in a short fact sheet. Entire
text books, college courses, and software packages have been
devoted to farm record keeping, and it’s unnecessary
to reinvent those wheels here. Instead, we will: 1) give you
some basic, practical record keeping advice that you can use
right away; 2) show you how those basic records can help you
calculate product costs; and 3) provide a resource listing
that you can tap for more in-depth information and guidance
if you choose.
COMPUTER OR PAPER? THAT IS THE QUESTION.
This is your first and most important decision. Do you want
to keep your records entirely on paper, or do you want to
keep them on a computer (which will probably still involve
a little paper)? There is no right or wrong answer to this
question. The right answer is the one that works best for
Know yourself, and be honest. If you own a computer and use
it regularly, use it occasionally, or have used a computer
once or twice and find it more interesting than overwhelming,
then the computer is probably your logical choice for record
However, if you don’t like computers, or have tried
to use them but still aren’t comfortable with them,
then don’t use them! Keep your records on paper for
now, and don’t spend any time and money on computer
hardware, software, or training; if you don’t like it,
it won’t help you in the end.
Whichever you choose, this decision is important because
it will help you focus your record keeping efforts most quickly
and effectively. Paper records work just as well as computer
records (especially if you’re good with a calculator),
so pick the format you like best. And while it’s important
to stick with your choice right now, it is reversible
later on. When you learn to keep good paper records, they’re
easy to enter into a computer if you learn to like computers
better in the future. So don’t agonize over this decision.
Just choose the format that you like best at the moment, and
go with it consistently!
BASIC TIPS TO IMPROVE ANY RECORD SYSTEM
The following points, listed in order of importance, are universally
helpful to both paper and computer record keeping systems.
(If you’re already doing all these things, great! You
can move on to the next section.)
- Run your farm business through a bank. Hopefully
you’re already doing this, but if not, start now!
Banking offers a logical, easy way to keep basic financial
records. Deposits and check writing records can help you
track a large portion of the money flowing to and from your
- Keep your farm bank account separate from your
family bank account. Again, you’re probably
already doing this, but if not, start right away! A clear
definition between your business and family finances will
help you make better financial decisions on both fronts.
This practice can also provide financial protection (depending
on how you incorporate your farm business) and a clear mechanism
through which to pay yourself for your work.
- Record detailed information on every sale and
purchase. Every time you sell anything (crops,
value added products, equipment) or buy anything (inputs,
office supplies, equipment), always record the following
- name of buyer or seller,
- weights (when appropriate),
- unit prices, and
- total price.
Record all this information in the same place on every
receipt, and also include it as you transfer each transaction
into your accounting records.
- Pay by check or charge, rather than cash, when
possible. Checks and charges are much easier to
record and track than cash payments. Set up charge accounts
with the business(es) you buy from the most, and pay your
account(s) regularly. This practice provides another way
to itemize and record your expenses, and (in the case of
charges) it can also bolster your credit rating.
- If you pay cash, get a receipt! You
probably already do this, but if you don’t, here’s
a reminder. Receipts are the most fool-proof way to remember
and record cash transactions. Without a receipt, it’s
easy to forget how much cash you spent, where it went, or
Keep all your new receipts in one place, and put
them there daily. Whenever you get new receipts,
put them in the same place in your wallet or vehicle so
you can always find them easily. Then, when you get back
home, use some kind of “catch-all” (a box, basket,
or file) to store your new receipts until you have a chance
to record them in your account books (vehicles or wallets
aren’t very good receipt storage places). And put
that catch-all in a place that’s easy for you to use
daily! Make receipt-filing a natural part of your daily
habits; it should only take a minute, literally. For example,
put receipts in a file on your desk as you head in for your
evening meal, or stash them in a basket on your bureau as
you remove your wallet from your pants at bedtime. Whatever
works for you, as long as you do it daily!
- Use a pencil (not a pen) to keep your paper records.
Pens are appropriate for receipts, but use pencils to balance
your check book or to log entries in your account book.
Pencils allow you to easily and neatly correct mistakes.
USING RECEIPTS AND BANK RECORDS TO
GATHER COST INFORMATION
The best way to approach record keeping and cost information
gathering (and any formidable task) is to break the work down
into manageable steps. Here are some basics to get you started:
Step 1: Make a list of ALL the products your farm
produces. This seems like a simple question, but
can you really name all your farm’s products?
Get a piece of paper and write a list of every item your farm
produces (for sale or on-farm use), and don’t leave
anything out! Do you sell a few dozen eggs from your flock,
or a few bunches of cut flowers from you home garden each
week? Do you produce hay, silage, or compost for on-farm use?
Do you sell tomatoes, pumpkins, sweet corn, and feed corn
and wheat? Do you trade your manure with your neighbor
farmer for hay? Do you process and sell jams and pickles?
Include it ALL, listing each product individually. The length
of your list may surprise you! (Be sure to write this list
on paper; physical writing is an important
part of the process!)
Step 2: Group your products into categories.
You might include your field corn, wheat (and possibly the
hay and silage) in a: “Field Crops” category.
Consider grouping the tomatoes, pumpkins, and sweet corn under
“Production Vegetables”, labeling the jams and
pickles as “Value Added”, and putting the compost
(and possibly the hay and silage) in a “Farm-Use Products”
category. And the eggs and flowers could be captured under
“Miscellaneous Small Stuff”. However, these category
titles are just suggestions. There are no right or
wrong categories. Choose ones that make the most sense to
you for your business, and make sure that each of your products
ends up in a category. (Try not to list a product in more
than one category, but if you can’t decide which category
is best right now, use two, and then make a note to narrow
it to a single category later.)
Step 3: Create General Operating and Overhead expense
categories, too. Some expenses will obviously fit
in one of your product categories, such as corn seed and canning
jar purchase receipts, or wheat and tomato sales slips. However,
receipts for tractor repairs, mortgage and tax payments, or
sale of your old combine usually do not fit in any one product
category. Therefore, you’ll need to create categories
such as “Equipment/Depreciable Assets”, “Office
Supplies”, and “Building/Property Maintenance”
in order to capture these more general expenses and income.
Again, choose categories that work best for you and keep them
as simple and straight-forward as possible.
Step 4: Create folders (paper or electronic) for each
category, and, in each folder, put an accounting spread sheet
for each product that falls in that category. This
organizational plan works equally well on paper or on your computer
accounting program. As you do this, remember that some of your
category headings will probably change once you start using
and improving your system. Stay flexible and, if you’re
working on paper, consider writing your category names in pencil
on your file folders for the time being.
Step 5: Also create paper folders labeled “Recorded
Expense Receipts” and “Recorded Sales Receipts”
(even if you’re working on computer). You will
need these files to store your paper receipts once you’ve
recorded their information in your accounting system. These
two folders will be used, along with your bank account book,
to clarify your whole-farm financial picture.
Now that you’ve set up this simple system, it’s
time to start plugging in the numbers:
Step 6: Enter data from your new receipts (both sales
and expenses) into your banking account book (on paper or
computer) regularly. Do this as often as
you can, and make it a basic part of your routine! Once a
day is ideal (if you have that many receipts), but once a
week is fine and more realistic for most farmers. If you can’t
manage once a week, then enter receipts once every two weeks,
or once a month at the bare minimum. The goal is to keep the
pile of in-coming receipts small, because, as we all know,
big piles of paper can put a screaming halt to progress.
Step 7: Once you’ve completed the bank entry,
enter the information again on the product spread
sheet(s) in the category folder. Enter the same information
you included in your banking account book (listed in Tip 3).
If you’re working on paper and have a photocopier, you
can also make a photocopy of each receipt to include in the
category folder, too, if you want. (If you do this, be sure
to write “copy” on the copy, and note the location
of the original.) But if you don’t have a photocopier,
don’t worry about it; the copies aren’t a necessity.
If you enter receipt information on more than one product
sheet or category folder, be certain to make a note next to
each entry to cross-reference it, to avoid double counting.
Step 8: After recording, collect the original receipts
in your “Recorded Expense Receipts” or “Recorded
Sales Receipts” folders.
There! You’ve done it! You’ve just collected
a lot of your important cost information in one place!
After you set up your initial folders and account sheets
(1 to 4 hours of initial work), the cost information collection
process should take only 10-30 extra minutes a week, if you
do it as part of your weekly chores. To calculate a product
price using this system, you can easily plug the data from
that product’s spread sheet into an enterprise budget
(see Pricing Fact Sheets 4
This system may not capture every penny of your costs,
but it will put you a long way toward a good calculation.
The key to success with this or any record keeping
system is simple: USE IT REGULARLY! If you enter
your receipt information into your accounting system routinely
(either daily, weekly, or monthly) you head-off the problem
of “paper pile-up”, the downfall of any good record
If you’ve already got an overwhelming pile of paper
on your desk, just gather up the pile, put it in a box or
file labeled “Before (today’s date) “, and
set it in a corner of your office for now.
Today is a clean slate and it’s time to move forward.
Start using your new record-keeping system with this week’s
receipts, and be vigilant about keeping up with your current
receipts until your new system is a normal, natural part of
your daily or weekly routine (Three months? Six months? You’ll
know when.). Once your system becomes second nature, you can
then tackle the box or file of old papers and add them to
your system, if you want to. Just make sure you keep rolling
forward with today’s and tomorrow’s receipts,
even as you integrate the older stuff. However, don’t
worry if you find you never look back; those older papers
are safe in their file, and you know right where to find them
when you really need them, like at tax time.