Market News & Headlines >> Brock Consultant Katie Hancock's Blog: Hints to Boost the Books
Insights from Brock Associates Consultant Katie Hancock
We know it’s important to keep high-quality accounting records. Whether it’s to find break-even numbers, plan for the future, or simply know where you are today, this part of farming is essential. Many stress the importance, but few share how. Here are some ideas I’ve implemented that may help others improve the books.
I’ve studied software that allows users to track strict inventory management through accrual accounting rather than the typical cash accounting. The problem with accrual accounting is it can be very complicated and time-consuming. Without training, it seems nearly impossible. I would like to work my way up to that in the future, but I am detailed with cash accounting without it running my life.
It’s easy to forget what was done in the past. Accounting software allows users to keep notes. For now, I’m using Quickbooks. I use a memo as a reminder of extra information. Not the memo that’s printed on the check like I would with an invoice number, but rather the memo attached to the account category. This is quick to add or change.
I break down each payment in multiple categories—even if it’s the same category listed multiple times. For example, detailing a chemical bill into multiple chemical purchases noting each product’s price and volume instead of only one bulk purchase amount under “chemicals.” This only takes a few more minutes and saves time later. Digging around for paper bills to adjust budgets or analyze is burdensome. It’s also quick to search a product to see if prices have changed throughout the season.
I’ve tried creating separate yearly categories like “2016 chemicals” or “2016 fertilizer,” but found it’s better to keep categories simple and memo the year instead. I found myself accidently applying products to the wrong year or category, which screws up the records. Sometimes it works to search monthly ranges to find yearly purchases, but if someone prepays or has overlapping crop years, the yearly memo is priceless. I’ll export a date range to excel and delete or sort years to find what I need. This also works for different enterprises within the business or can be used to separate crops. On the surface, there are minimal categories on my profit and loss statement, but I can look deeper if need be.
Noting machinery purchases by model, year, serial number, and if new or used, quickly IDs the machine. I like having the serial number recorded for checking liability insurance records, and detailing information including new or used helps with tax depreciation paperwork.
Use contract IDs for leases and loans including payment dates. You can always search paperwork, but it’s quicker to reference the software.
If there is something in question I want to look at later, I start the memo with “???,” which is an easy way to enter the information while being able to find it later to adjust accordingly. I also like having a third party accountant review my records for account accuracy. Having a code helps the accountant see where I need help if I couldn’t fix it beforehand.
I always feel the more information, the better. We aren’t all accountants and don’t have time to commit a full time job to the books, but we can still be detailed. Records are invaluable to any business and I hope this helps those looking for new ideas.
Email Katie at [email protected]