Financial Record Keeping

Why Keep Records? Tax Preparation Management Decisions –Production, financial, investments Crisis –Death, fire, flood, theft, accident Proof of Ownership or Payment –Lawsuits, audits, etc. Backup of Original Documents

Records In a Nutshell Must be organized & usable –Find a system that works for you Need to know: –What you own (assets) –What you owe (liabilities) –What you earn (income) –What you spend (expenses)

Records to Keep Financial Records –Cash Inflows (receipts or sales) Outflows (expenses) –Payables (cash you owe) –Receivables (cash owed to you) –Assets (things you own) Cash, equipment, livestock, land, facilities, etc. –Liabilities (loans) Operating loan, credit card, equipment loans, mortgages

Records to Keep Production Records –Crop Acres, seed population/variety, fertilization, pesticides used, irrigation, yields, etc. –Livestock Premises ID, breeding records, feed ration, medications, yields, etc. –Inventories Supplies, feed on hand, etc. –Environmental, chemical use CYA principle!!

Other Records to Keep Personal Records –Wills, power of attorney, living will, health records Household Inventory Ownership Records –Deeds, titles, contracts, warranties Official Documents –Licenses, contracts Financial Records –Bank statements, credit cards, loans, investments, balance sheet, budgets Insurance Records Tax Records (for 3-7 years)

How to Keep Records “Shoebox” (very common) –Keep all records, receipts, etc. in a box Record Books & Files Computer –Quicken, QuickBooks, Peach Tree, Red Wing Accountant Record keeping services

Accounting Methods Cash –Most common for ag & small business –Simple, easy –Record receipts & expenses when the cash changes hands –We’ll assume cash accounting for this course Accrual –More complex, time-consuming –More accurate, preferred by lenders –Record receipts & expenses when the transaction occurs, regardless of whether cash changes hands

Cash vs. Accrual December 1 - You buy $15,000 of fertilizer “on account” January 10 – You write a check for $15,000 Cash Accounting –January 10 – Fertilizer Expense - $15,000 Gets included on next year’s taxes Accrual Accounting –Dec. 1 – Fertilizer Expense Payable - $15,000 Gets included on last year’s taxes

Records and Computers Financial Packages –Quicken, Money, Managing Your Money, etc. –Cheap, quick and easy way to organize –Don’t need accounting skills to use Accounting Packages –Quickbooks, Peach Tree, DAX, etc. –Detailed statements –Need to know the basics of accounting