Farm accounting : The only guide you'll ever need - Part 2

We continue on the top farm accounting factors. Accounting for all these factors is far from straightforward. But with a little thought and planning, it's possible to get into a routine of managing the finances.

5. Understand the concept of depreciation.

Most countries allow you to deduct the cost of new equipment from your tax payment. And as it gets older, wears out, or is rendered obsolete by newer technology, its worth will decrease. Make sure you're familiar with your country's depreciation standards, as the worth of your equipment will affect your tax bill.

Tractors, trucks, harvesting equipment, and other farm machinery are all examples of agricultural machinery.

Built to last, yet subjected to intense use and wear in all types of weather. Although high-quality equipment retains its value, new technology is rapidly advancing in this field, making older machinery less valuable.

Computer hardware

Computers depreciate quicker than virtually any other sort of equipment, making them increasingly important for efficient agricultural management.
Hand tools, machine tools, and repair equipment are all available.

Low-quality things can fail sooner and be a poor investment, but they are often long-lasting with a long depreciation tail. Keep note of your purchases and account for depreciation every year.

6. Always Account for loss

Farming is dependent on the weather, which can be unpredictable at times. While a hot, dry summer is ideal for tomato farmers, it may be disastrous for green pepper. Unexpected rain can cause the hay to decay in the fields, while unseasonal storms can kill a whole wheat harvest.

Any losses should be recorded in your accounts in order to accurately measure the overall return on investment.

7. Keep records of your profits.

It's not always easy to figure out how profitable a farm is. 

Profit on a month-to-month basis

It's a simple way to see how your farm is doing right now, but it won't help you anticipate future cash flow or earnings.

Expenses of working with horticultural crops

This is a typical formula for crop farm calculations, but make sure your values are accurate and based on current crop costs.

Profit or revenue per unit area

Dollars per hectare is a measure of how much money or profit is made for each unit area of farmland. While this provides a reasonable indication of current farm performance, it does not always account for underlying expenses. Almost any farm can look to be profitable for a short period of time provided it has received enough recent investment.
Using high-quality farm accounting software is the only method to accurately assess farm profitability over time. Another advantage is that you may use it to make projections and predictions based on previous trends.

8. Make use of the internet.

Nowadays, almost all farmers have access to the internet. It isn't always quick – rural living has its drawbacks – but it is typically plenty for the essentials. The internet can be used for a variety of purposes, including:

Analyzing market trends and prices
Keeping track of these figures might aid farmers in deciding how to best utilize their land.

Weather forecasting, both long-term and short-term
For nearly every sort of farm, this is essential knowledge.

Using cloud-based applications
These new capabilities allow users to access information, accounting tools, resources, and bank accounts much more quickly. Direct feeds for banks and farm suppliers will be available in good farm accounting software. As a result, you'll be able to manage all of your resources, suppliers, and partners from one platform.

9. Consider hiring a part-time accountant

It is viable to maintain the accounts of a small or even medium-sized farm on your own, but it will be difficult due to the time and complexity necessary. If you're running a family farm, you might be able to appoint one family member to handle the accounts while another handles the day-to-day operations. There will, however, be a high learning curve.
A professional accountant can relieve you of much of the laborious detail work, allowing you to focus on running your business the way you desire.
Although the cost may appear expensive at first, good accountants can save you money in the long term.

With their understanding of legislation and cost management, they may be able to reduce your bills, perhaps enough to cancel out the cost of your accountant's bill.

You must keep track of every aspect of your farm.
Farm accounting, as we've seen, is a vast topic. Every farm is unique, and this guide has just touched the surface.

Fortunately, for farmers that choose to do it alone, there is now a wide choice of high-quality software, the majority of which is cloud-based, to aid in the accounting process.

Even if you hire an accountant, you'll need to have certain key financial data on hand. It will help your farming business function much more efficiently if you and your accountant collaborate in the cloud so that you can both access the numbers.

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