How to Report on your Farm Finances
As a Farm business owner, it is important for you to have accurate reports on your Farm finances to know what parts of your business are profitable, and what is not. It is crucial to analyze the profitability of your Farm operations, breaking down income and expenses, and setting goals for different lines of your business.
We recently met with Taylor Bridges, a Quickbooks Pro Advisor, to discuss the importance of Farm finances, and how to manage reports across your business. Listen to the podcast:
1. Organize your Books
Before creating financial reports, you must clearly document and organize all of your numbers. Collect data (individual numbers) from each area of your business. This will include all your expenses for equipment, labor, taxes, etc., and your gross income from sales across digital and in-person transactions (one-time or recurring).
Breaking down your numbers by expenses and income will enable you to determine the profitability of your Farming operations. You’ll see where you are spending the majority of your money (and where you can save), and where you are making the majority of your money (and lean into that section of business). You should analyze what has changed month-over-month or year-over-year to see what can be done differently or remain the same.
Separating your expenses and income based on different enterprises will help guide your decision making for the future of the Farm. You can set KPIs (key performance indicators) to see where you are in relation to goals for your business and finances.
Assembling financial reports can help organize your numbers, allowing you to better understand the health of your Farm business. Your numbers must be accurate, or else your reports will not be helpful.
2. Use Accounting Solutions
Organizing numbers across your business can seem like a daunting task, but you can use a third-party accounting solution to quickly aggregate your data to better make sense of your finances. Intuit Quickbooks Online is a best-in-class small-business accounting solution that readily assembles your data in aggregate to help simplify the analysis of your Farm finances.
Many accountants, however, utilize other third party solutions to extract Quickbooks data, and combine other data sources, to offer more drill-down details and customization. Because every Farm is different, with various reporting needs, many accountants choose to build custom reports for their clients. Some accountants use Excel or Google sheets to personalize their reports with an array of formula options.
Listen: Your Farm Finance Checklist
Other accountants may use applications such as Domo, Keeper, PowerBI or Tableau (among others), to assemble more customized options for their clients. Many third party solutions connect directly to Quickbooks Online (as does Barn2Door), or they may offer a CSV or XLSX import feature.
Every Farmer spends their money on different things and runs their business uniquely, so it is commonplace for accountants to utilize third party reporting solutions that can be tailored to the specifics of your operation.
3. Work with an Accountant
The most successful Farms working with Barn2Door work with an accountant to manage their finances. Accountants offer an independent perspective and will give you expert advice and insights into your Farm finances. This will keep your Farm accountable with the cold, hard numbers and facts of your business to help you achieve your financial goals. As many Farmers have decades of education and experience with their products, accountants, too, offer their expertise when it comes to your finances.
Accountants can work within your finance software to analyze your data and assemble monthly reporting packages (including an income statement and balance sheet). This will allow you to review your goals, expectations and questions with a trained professional.
As a financial advisor, Taylor helps Farmers look at their net income (how profitable the business is) and their asset turnover ratio (measuring the efficiency of how Farm capital is used to grow the business). Her goal is to help Farms produce a higher yield with lower input costs for a higher rate of turnover. Meaning, she wants Farms to make more money and spend less, which is possible by carefully evaluating the finances of the business periodically.
Additionally, all of your costs for Accounting services can be used as a tax write off for your Farm, making them an obvious tool. It is important to work alongside someone who understands your Farm finances, goals and shortcomings to better equip your business for future success.
Conclusion
When you work with an accountant to assemble custom-tailored reports to measure and analyze your income and expenses, you will have a better understanding of your Farm finances (putting you on a path to greater profitability). As an independent business, it is crucial to know what is occurring in every area of your operation, and where you are losing and gaining money. Farm finance reporting is necessary to run a sustainable, scalable business that will grow for years to come.
Want to join one of our Farm Finance Academy classes? Check out the schedule here.
Barn2Door offers software for Independent Farmers to create and promote their brand, sell online and in-person, and save time managing their business. If you’re curious to learn more, watch this 5-minute video.