Farm accounting can be an incredibly complicated process. Whether you’re an owner, operator, or a dedicated accountant, there are a ton of different costs to track. Also, the long-term market cycle of the agriculture industry demands that farms exercise strict cost controls—trimming the “fat” from the “meat” in all of their expense categories wherever possible.

Standardizing accounting practices for any industry can be incredibly difficult. In farming especially, there are countless variables that can severely impact the production numbers of a farm—everything from the vagaries of natural weather patterns to soil quality, crop/livestock genetic factors, and the availability of labor at an affordable cost.

Agriculture accounting needs to account for all of these variables and standardized, “Big Bucket” accounting solutions and practices often fail to, well, account for these variables and the impact they can have on farm operations.

Inflation is an ever-present problem for any business—and farms are no exception. Higher inflation rates can mean having to pay more to workers to keep them, paying more for various supplies, and having a harder time selling certain products as cost-conscious consumers cut back on grocery expenses to stretch their own budgets. Having a farm management information system can help farm owners and operators stay ahead of inflation and keep their businesses profitable.

Having liquid assets can be crucial for any business. Farms need money to help fund the acquisition of new acreage, pay for employee labor, buy and maintain equipment, process raw goods into finished, ready-to-sell products, and more. One way that farmers can acquire the capital needed to fund their operations is to apply for a farm loan.

Managing livestock can be an enormous challenge, even for seasoned farm owners. From managing animal husbandry to raise generations of healthy and productive livestock to tracking groups, managing feed schedules, providing veterinary care, and more, effective livestock management requires constant effort and attention to detail. Livestock management software can help farmers/ranchers take control of their livestock production processes to better control costs, improve sustainability, and fuel growth for their livestock-related enterprises.

For any farm, inventory management is one of the most challenging, yet rewarding accounting processes affecting the integrity of your entire management information system. This process is crucial to ensuring that owner-operators can successfully take their crops and livestock to market. To help better track their inventory, many farmers use a farm inventory management software solution.

Every day, farm owners and operators are faced with a series of choices—some major, some minor. From choosing which crops to plant to deciding on equipment acquisitions, fertilizer usage, whether to hire more labor, and more, the choices are endless and often require frequent revisiting as situations change. And every decision requires careful consideration of your farm’s enterprise budget.

When preparing your farm enterprise’s business plan, what’s the reason for your analysis? Is it just to hand over to your credit manager for a business loan application? Or, are you using that analysis to turn your cost and production centers into profit centers for your business?

Nobody said managing a farm would be easy. From managing actual crops to tracking financials for farm profitability, modern farming can be incredibly difficult. Financial management choices such as adding or not adding new farming technology, sourcing crop seed, purchasing fertilizer, or hiring additional labor can have an enormous impact on farm profit and loss ratios.

Financial management can be a crucial part of ensuring farm profitability. Conversations about the agricultural industry tend to focus more on the production side, whether it’s crops, livestock, or the market impact on those commodities. 

However, farm managers know not to underestimate the necessity of understanding profit and cost centers in a farming operation. Having a firm grasp on the basics and knowing how to measure profitability is vital for ensuring the long-term viability of your agricultural business.