When analyzing your farm’s financial reporting system, what level of reporting does your farm use? Are you on a cash basis, an accrual/management accounting basis, or both? In other articles, we’ve contrasted the ways that farmers produce their financial statements and the  conflicting goals of maintaining simultaneous financial records using both cash and accrual.

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.

The Farm Financial Standards Council has recently releasedFinancial Guidelines for Agriculture: An Implementation Guide for Non-Accountants. Not every farm or ranch operation has an accountant on hand or the accounting knowledge to take advantage of the ways financial reporting and data can revolutionize the way you make decisions, and, more importantly, grow. In recognition of that gap, the guidelines seek to help farmers and non-accounts gather the needed financial information, analyze it, and put it to use as decision support.In support of that effort, we think it equally valuable to understand who the council is and why this information is so vital to your farm business.

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We often discuss the different types of accounting used by agricultural accountants. A good portion of farm accounting, especially early on, was limited by technology and the need to simply keep track of finances. Farm accounting was used to keep track of the money coming in and out of the farm. Enter managerial accounting which can be used to make decisions about the future. Both types of accounting are important for farmers to understand, and utilize, in order to make sound financial decisions for their farms.

’Tis the season to toil over financial statements. For nearly every business, the end of the year signals not just end of Q4 reporting but also end of year reporting. For farms and ranches, financial reporting can be complicated. Converting cash-basis accounting records to “adjusted accrual” financial statements and preparing financial reports based on a hybrid model can be complex, but it doesn’t have to be. Still, understanding the options and challenges is essential for anyone undertaking farm financial reporting tasks.  

When it comes to farm oversight, understanding where you are, in terms of financial information and accounting is vital. Growth Path Accounting starts with asking where you are now and what your information goals are. Growth Path Accounting can be narrowed down to three objectives:

• Leveraging the technology available to you through software and applications
• Learning advanced accounting skills at your own pace  
• Preparing you and your operation for future expansion to integrated farm records
  
  

To get there, you first need to understand Growth Path accounting and all of its separate parts. That informs not just your understanding of where you are and which accounting method you’re currently using, but also where you’d like to be and the advantages of the other accounting methods available to you.

"If you’re struggling with a main street accounting program today, it might be time to reach out to a higher-level, farm-focused program for your business."  So says Editor Willie Vogt in the April 2017 Farm Industry News cover story, "Raising Your Accounting Game."