Mastering Farm Books Accounting for a Thriving Farm Business

Accurate record-keeping is the foundation of a successful farm business, and farm books accounting is the key to achieving this.

Farmers should track income and expenses separately, as shown in the example of a farm's income statement, where income from crop sales is recorded as $50,000 and expenses for equipment maintenance are recorded as $10,000.

A well-organized farm accounting system helps farmers identify areas where costs can be reduced and efficiency improved, allowing them to make informed decisions about resource allocation.

By regularly reviewing and analyzing farm financial records, farmers can stay on top of their finances and make adjustments as needed to ensure the long-term sustainability of their business.

Creating a detailed budget is the first step in building a strong financial foundation for your farm. Your budget should account for all income sources, such as crop sales, livestock sales, and government subsidies, as well as expenses like seed, fertilizer, equipment maintenance, and labor costs.

A well-constructed budget is the cornerstone of any successful farm operation, allowing you to make informed decisions, anticipate challenges, and seize opportunities as they arise. This is according to Darren Frye, President and CEO of Water Street Solutions.

To ensure accuracy, break down your budget into smaller periods, such as months or quarters, to make it easier to track progress and make adjustments as needed. Regularly compare your actual income and expenses to your budget to identify variances and take corrective action when necessary.

Consider the following strategies to manage cash flow during lean periods:

FarmBooks offers a range of farm-specific features that make it a top choice for farmers and ranch managers. These features include the ability to monitor farm and personal expenses, manage inventory, and track fixed assets.

With ZarMoney, you can get a clear snapshot of your farm's financial health with its advanced balance sheet feature. This gives you an instant overview of your assets, liabilities, and equity at any time.

Quickbooks, on the other hand, requires farmers to manually categorize their expenses, which can be a time-consuming and tedious task. This is one area where farm accounting software can be improved.

FarmBooks offers essential accounting features to help you manage your farm's finances effectively. FarmBooks has a general accounting feature called the Accounts Register, which is similar to a paper check register with color-coded transactions.

The Accounts Register tab gives you a quick list of all your farm's income and expenses. This feature includes checks, deposits, and paychecks, which are color-coded for easy identification.

FarmBooks also offers a Balance Sheet feature, which provides a snapshot of your farm's financial health. This feature gives you an instant overview of your assets, liabilities, and equity at any given time.

A Balance Sheet is a crucial tool for assessing solvency, tracking growth, and making informed financial decisions. By providing a comprehensive view of your farm's financial position, ZarMoney enables you to make better decisions.

FarmBooks uses a coding system to classify transactions, which includes three types of codes: ATIGD, External codes, and Enterprise codes. The ATIGD code provides a general classification of earnings, expenditures, losses, and other transactions.

External codes can be used for more detailed transactions, such as family living, miscellaneous, or loans. Enterprise codes can track crop or livestock production or other nonfarm business.

Here are the three types of codes used in FarmBooks:

FarmBooks also offers features for farm management, including the ability to monitor farm and personal expenses, manage inventory, and track fixed assets. This feature helps farmers and ranch managers streamline their daily farm-related tasks and responsibilities.

FarmBooks has some limitations that might make it less suitable for some farmers. It requires an additional fee for additional farms, which can add up quickly.

One of the biggest drawbacks is that it's difficult to share books with a bookkeeper or tax pro. This can make it hard to get help when you need it.

Another issue is that FarmBooks can't send recurring invoices, which can be a hassle for farmers who need to send regular invoices to customers.

The software also lacks a mobile accounting app, which can make it difficult to stay on top of your finances when you're on the go.

FarmBooks has a unique ATIGD transaction classification structure that may be difficult to master, especially for farmers with no accounting background. This can lead to errors and frustration.

Here are some of the key cons of FarmBooks in a nutshell:

Automatic receipt categorization is a game-changer for farmers who struggle with manually categorizing individual expenses on their receipts. Quickbooks requires farmers to do this manually, which can be a tedious and time-consuming task.

Farmers wish their accounting tool could digitally parse and categorize these line items for them, which would be a major upgrade.

FarmBooks, a farm accounting software, generates a wide range of reports to help you understand your farm's financial performance. These reports can be run at any time to provide valuable insights into your farm's income, expenses, and cash flow.

The Income statement shows total farm income and expenses, including net operating income. This report helps you evaluate your business plans and expansion strategies.

FarmBooks also offers a Transaction journals report, which lists all transactions for income, expense, wage withholdings, losses, loans, and Accounts Receivables. This report gives you a detailed view of all financial activities.

The Financial analysis report provides a summary of farm and nonfarm income and expenses. This report helps you identify areas where you can optimize your finances.

In addition to these reports, FarmBooks offers a Nonfarm income statement, which summarizes nonfarm income, itemized expenses, family living expenses, and net nonfarm income. This report helps you understand your nonfarm income and expenses.

The Monthly cash flow report shows sources and uses of cash by income and expense. This report helps you manage your cash flow and make informed decisions.

Other reports available in FarmBooks include the Check register, Balance Sheet, Income statement/profit and loss (P&L) statement, Net taxable income statement, Schedule F, Sources and uses statement, Credit analysis, and Flow of funds.

Here are some of the reports available in FarmBooks:

Setting up a bookkeeping system tailored to your farm is crucial for managing your finances and profit center effectively. Cash-basis accounting is more straightforward for most small farms, but accrual accounting provides a more accurate picture of your farm's financial health and cost centers.

To set up your bookkeeping system, identify the key financial statements you'll need to maintain, such as the balance sheet, income statement, and cash flow statement. The balance sheet shows your farm's assets, liabilities, and equity at a specific point in time.

You'll need to create a general ledger, which is a master record of all your farm's financial transactions. The general ledger should include accounts for assets, liabilities, equity, revenue, and expenses. Each transaction should be recorded in the appropriate account, with details such as the date, description, and amount.

Maintain separate journals for specific types of transactions, including a cash receipts journal, cash disbursements journal, and payroll journal. Inventory records are also crucial for farms, as they help you track your crops, livestock, and supplies.

To manage cash flow and working capital, forecast cash inflows and outflows to anticipate shortages or surpluses, and establish a line of credit or emergency fund to cover unexpected expenses. Cash is king in agriculture, and farms that effectively manage their cash flow are better positioned to weather market volatility and take advantage of opportunities when they arise.

Here are some essential financial records to set up for your farm income:

By setting up these records and managing your cash flow effectively, you'll be able to make informed financial decisions and optimize your farm's profitability.

Effective tax planning is crucial for farm businesses, allowing you to reduce your tax liability and maximize savings. According to Paul Neiffer, a CPA, farmers can deduct ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

To minimize your taxable income, it's essential to time your income and expenses strategically. By deferring income and accelerating expenses, you can reduce your tax liability. As Robert Gunther, a CPA, explains, farmers can use various methods to defer income, such as installment sales or deferred payment contracts payments.

The way you structure your farm business can also have significant tax implications. Choosing the right business entity, such as a sole proprietorship, partnership, or corporation, can help you take advantage of favorable tax treatment. According to Kristine Tidgren, director of the Center for Agricultural Law and Taxation at Iowa State University, forming an S corporation or LLC can provide tax benefits to most farmers.

Here are some key tax deductions and credits available for farmers:

Creating a detailed budget is the first step in building a strong financial foundation for your farm. Your budget should account for all income sources, such as crop sales, livestock sales, and government subsidies, as well as expenses like seed, fertilizer, equipment maintenance, and labor costs. According to Darren Frye, President and CEO of Water Street Solutions, a well-constructed budget is the cornerstone of any successful farm operation.

Leveraging technology can simplify your farm bookkeeping processes and make informed financial decisions. By adopting the right accounting software, you can save time and reduce errors.

You should compare the features, pricing, and user-friendliness of popular accounting software options like QuickBooks, Xero, and FarmBooks. This will help you find the best software for your farm's unique needs.

Industry-specific features, such as crop and livestock tracking, are essential in accounting software for farmers. This can help you manage your farm's financial health more effectively.

Connecting your accounting software with other farm management tools can automate data entry and provide a comprehensive view of your farm's financial and operational performance.

Creating an operating budget for your farm is a crucial step in managing your finances effectively. Your budget should account for all income sources, such as crop sales, livestock sales, and government subsidies, as well as expenses like seed, fertilizer, equipment maintenance, and labor costs.

According to Darren Frye, a well-constructed budget is the cornerstone of any successful farm operation. It allows you to make informed decisions, anticipate challenges, and seize opportunities as they arise.

To create an accurate budget, forecast cash inflows and outflows to anticipate shortages or surpluses, and establish a line of credit or emergency fund to cover unexpected expenses. Effective cash flow management is essential for maintaining a healthy working capital position on your farm.

A key component of your operating budget is managing your accounts receivable and payable effectively. Invoice customers promptly and follow up on past-due accounts to ensure timely payment. On the accounts payable side, take advantage of early payment discounts when possible and negotiate favorable terms with suppliers.

Here's a breakdown of key expenses to include in your operating budget:

By regularly reviewing and adjusting your budget based on actual performance, you can ensure that you stay on track to meet your financial goals.

We evaluated FarmBooks using a detailed scoring rubric, which assigned weights to various categories based on their importance. This rubric included pricing, ease of use, and user reviews, among others.

Our expert analysis revealed that FarmBooks is not a complete package, lacking a mobile app to work on the go. This limitation may hinder your ability to manage your farm's finances remotely.

We also noticed that FarmBooks is not as popular among accounting professionals, which might make it challenging to find a bookkeeper with expertise in the software.

Farm management software can be a game-changer for farmers, but it's not all sunshine and rainbows.

FarmBooks, a popular choice among farmers, lacks a mobile app, making it difficult to work on the go.

While it's great for general accounting and farm management, it's not a complete package.

FarmBooks isn't as popular among accounting professionals, which can make it hard to find a bookkeeper who's an expert in the software.

This can be a major drawback for farmers who need to stay organized and up-to-date on their finances.

Farmers should carefully consider their needs and the limitations of FarmBooks before making a decision.

We take our evaluation process very seriously, so we created an internal rubric to help us compare different farm accounting software. This rubric has specific weights assigned to each category based on how essential they are to our evaluation process.

We evaluated FarmBooks and other best farm accounting software based on several key categories, including pricing, ease of use, and user reviews. Our scoring rubric is designed to give us a comprehensive understanding of each software's strengths and weaknesses.

Here's a breakdown of our scoring rubric:

We assigned weights to each category to ensure that we're considering the most important factors in our evaluation. By using this rubric, we can compare different software options and choose the best one for our needs.

FarmBooks is a specialized farm software that excels in farm-specific features, outshining its competitors in this category.

FarmBooks offers a one-time fee of $595, which includes a customized chart of account for farmers, farm inventory management, and fixed asset accounting. This pricing model is more affordable than some of its competitors, such as QuickBooks Online Advanced, which charges between $35 to $235 per month for 1 to 25 users.

If you're a hobby farmer, Wave is a great option as it's a free accounting software that includes unlimited users and basic income and expense tracking. However, if you need more advanced features, FarmBooks or QuickBooks Online might be a better choice.

Here's a comparison of FarmBooks with its competitors:

FarmBooks is a great choice for farmers who need to manage their finances efficiently. It's the most affordable farm-specific accounting software we've reviewed, with a one-time fee of $495 plus $95 per year.

One of the standout features of FarmBooks is its farm-specific inventory management capabilities. This allows farmers to keep track of their inventory levels and manage their supplies effectively.

FarmBooks also lets you create enterprise codes to track both farm and personal expenses, making it easier to separate your business and personal finances. This can be a huge time-saver for farmers who need to manage multiple expenses.

The software also includes built-in payroll at no additional cost, which can be a significant cost savings for farmers who need to pay their employees.

FarmBooks has a batch-entry feature to process a large number of transactions, making it easier to manage your finances during peak periods.

Here are some of the key pros of using FarmBooks:

If you're looking for alternatives to FarmBooks, there are several options to consider. FarmBooks isn't suitable for farmers with bookkeepers who work from their own office, as it's difficult to share your books with them. A better option is a cloud-based application like QuickBooks Online, which allows your accountant to have live access to your books.

One of the main differences between FarmBooks and its competitors is pricing. FarmBooks costs $595 upfront, while QuickBooks Online starts at $35 to $235 per month. The Farmer's Office, on the other hand, is custom-priced, and Wave is completely free.

If you're a hobby farmer who needs basic income and expense tracking for free, Wave is a great option, including unlimited users. However, if you're managing multiple farms, you may want to consider The Farmer's Office, which allows you to set up and manage multiple farms with no additional fee.

Here's a comparison of the main features of FarmBooks and its competitors:

Keep in mind that FarmBooks is a specialized farm software, and it excels in farm-specific features, such as inventory management and tracking personal income and expenses. However, it trails behind QuickBooks Online in accounting features, and it's difficult to provide access to your accountant.

FarmBooks is an affordable farm-specific program, costing $595 for a single farm installation, plus an annual maintenance fee of $100 for program updates and support after one year.

The pricing structure is still considered affordable despite the annual fee after the first year, given the benefits and features it offers.

You can add a second farm for $200 and a third farm for $150, making it a great option for farmers with multiple operations.

The program would have earned a perfect score if it offered monthly subscription plans, which provide greater flexibility for small-scale farmers.

Backing up your farm data is also an option, with FarmBooks database backup available via offsite secure file transfer protocol (FTP) for as little as $5 per month.

FarmBooks offers a range of farm management features, including the ability to monitor farm and personal expenses, manage inventory, and track fixed assets.

It provides all the features we wish to see, earning a perfect score in this category.

Invoicing and Payments are crucial for farm business operations. Efficiently creating and sending invoices to customers is vital for any farm, as it helps maintain a healthy cash flow and prevents lost revenue.

FarmBooks offers essential invoicing features, including generating invoices, estimates, and billings, which can be sent directly to customers. You can also post payments and deposits automatically and monitor customer balances.

Here are some key invoicing features in FarmBooks:

FarmBooks also allows you to generate various invoice forms and statements and email them to your customers. However, one limitation is the absence of an option to create recurring invoices, which can be beneficial for customers who order the same product or service regularly.

The A/P module in FarmBooks allows you to create a new vendor and manage your list of vendors. You can track your unpaid bills and payments to 1099 contractors, which is a huge time-saver.

One thing to be aware of is that you can't enter vendor credits to record refunds to the vendor. This can make it tricky to keep track of refunds and rebates.

You can use the A/P feature to keep tabs on your outstanding bills and stay on top of your finances. This is especially helpful during tax season when you need to have all your financial ducks in a row.

The A/P feature in FarmBooks is a solid tool for managing your vendor relationships, but it's not perfect. For example, you can't attach receipts to expenses, which can make it harder to keep track of your expenses.

Overall, the A/P module in FarmBooks is a useful tool for farmers who want to streamline their financial management. With a little bit of finesse, you can use it to stay on top of your vendor payments and keep your finances organized.

Invoicing is the backbone of any farm's business transactions. It's crucial for accurate billing and maintaining a healthy cash flow.

FarmBooks offers essential accounting features, including A/R management, but lacks the ability to create recurring invoices, which can be a significant limitation for farms with regular customers.

To create invoices in FarmBooks, you need to specify a few invoice preferences, such as business remitter mailing details, sales taxes, and finance charges. This can be a bit time-consuming, but it's worth it for the end result.

The A/R feature in FarmBooks allows you to generate invoices, estimates, and billings, which can be sent directly to customers. You can also track sales tax collections and monitor customer balances.

However, if you have customers who order the same products or services regularly, you may benefit from recurring invoices, which are offered by other programs like QuickBooks Online and The Farmer's Office.

Here are some key invoice options in FarmBooks:

In contrast, ZarMoney provides a robust invoicing feature that allows you to swiftly create and send professional invoices to clients and track their payment status.

Writing checks can be a tedious task, especially for farm managers who need to keep track of multiple transactions. FarmBooks makes this process easier by allowing you to record and print checks directly.

The check writing feature in FarmBooks automatically fills in the payee/vendor, date, check number, and bank account information, saving you time and reducing errors.

To print a check in FarmBooks, simply click on File and select the Print Checks drop-down, then choose from the list of checks and click the printer button.

This feature also registers the checks in the farm's accounts automatically, helping you monitor payments to vendors and other expenses.