In Bookkeeping, Details Are a Good Thing

Finance First

The more specific the better when it comes to tracking costs and revenue.

Published on: August 5, 2013

Are you a detail person? Factual? Systematic? Anal retentive? All of those are good words to describe numbers people. And it would be a good idea to get in touch with your inner detail person when it comes to doing farm bookkeeping.

One of our ag finance specialists on staff was sharing that he brings this attention to detail to his own farming business. When he does the books on his own farm, he's very specific with his expenses and revenue. Repairs and maintenance are broken out separately on vehicles and equipment. Costs and revenue are tracked field by field, for example. Why?

Well, sometimes tracking and crunching the numbers in just the right way reveals some surprises about profitability. It also can lead to different decision making for the future. This guy and his brother are reasonably aggressive with cash rent. They have been surprised to learn that one of their fields that they've always considered tough to farm turned out to be the most profitable.

Field by field tracking of expenses and income led them to understand that low cash rent on this field (because others were less interested in that ground) and decent production combined for high profitability.

In another instance, a client of ours partners with us for this type of detailed bookkeeping. He wanted to know whether one of his fields would still be profitable if he applied a certain amount of fertilizer. So we ran the numbers for him and found out that the field would be upside down if he did that. That certainly made his decision quite a bit easier.

Another client wasn't able to keep his books current during the busy seasons in farming, especially during harvest. He realized he was missing out on key information that he could use to make decisions for the next crop year – like fall tillage and fertilizer decisions – because of the delay.

He started partnering with us to keep his books. He says he finds it really helpful to be able to use immediate information about his costs and revenue from that year's harvest to make decisions about his next crop. Before, he had just used the same tillage and fertilizer program as the previous year. Now he has data to back up his decisions and he can easily make smart adjustments to his plan.

It's challenging to keep the farm books up to date and detailed. But knowing up to date financial information about your operation can help you make decisions more quickly. A bookkeeping partner can help you sort out the details.