How Farmers Should Manage Recordkeeping Year-Round for Less Stress and Better Decision-Making
Farmers know the dreaded tax-season scramble well.
You have a meeting with your tax preparer on the books. And they’re asking for all your documents and receipts from the prior season. So you start to dig: Wait, where did I save that property tax invoice? Where is that stack of gas receipts? Did I record all my repair costs somewhere?
Putting all this off until right before a tax appointment is a common issue. Understandably so, given farmers’ already packed schedules and to-do lists. And not many growers want to be sitting at a desk instead of being out in the field.
But failure to maintain good records throughout the year can cause unnecessary stress and limit your visibility into how your operation is really doing.
Instead, prioritizing accurate recordkeeping all year-round can help ensure a much smoother tax season — while also aiding high-level financial decision-making.
A planting window requires extensive planning, and you wouldn’t try to cram all that work into one week. When it comes to recordkeeping, it pays to be just as proactive.
What records do you need to keep track of?
Every transaction (in and out) related to the operation needs to be recorded:
Seed
Fertilizer
Chemicals
Fuel
Repairs
Equipment purchases
Livestock expenses
Grain sales
All settlement sheets
Some records are simpler to maintain than others. For example, it’s quick to just save a copy of a dealer invoice after you’ve made your chemical purchase. It’s a lot harder to remember to grab that receipt from the gas pump. The more you can make it a habit to save and record each transaction, the more it will start to feel like muscle memory.
Also, make sure to separate all farm expenses from personal expenses. Mixing the two is one of the most common mistakes we see from farmers.
It’s easy for all the numbers to run together when everything comes from the same bank account. Instead, pay all farm-related expenses from a farm-specific account. Even if you’re not a formal entity, having one account dedicated to the operation is cleaner and makes recordkeeping much less of a headache.
Why recordkeeping matters year-round — not just during tax season
Scrambling at the last minute to organize transactions for a tax return could increase your risk of missing out on a potential deduction. Being able to maximize your tax savings is reason enough to keep quality records.
But at a higher level, regularly updated, accurate records tell you how your farm is doing financially. They can help you:
Identify where there’s opportunity to reduce spending
Budget and plan for future expenses or even farm expansion
Pay down debt
Improve profitability
Prep for retirement or succession
Build strong relationships with other business partners, like lenders or landlords
Strong, year-round recordkeeping is the base that allows you to not only keep your operation running, but to take advantage of opportunities to grow it.
For example, say you hear your neighbors are selling 40 acres. Land sales happen quickly, and your bank will immediately ask for balance sheets and income statements once you express interest. Having accurate records ready to go quickly could be the difference between you getting those 40 acres vs watching someone else swoop in for the purchase.
Advice to reduce recordkeeping stress
Break it down into manageable chunks.
You don’t need a sophisticated or high-tech recordkeeping system. You just need something you’ll consistently stick with all year-round. We encourage our farmer cooperators to sit down once a month to reconcile their books, record all transactions, and organize receipts.
When you get some down time, sitting at the computer to dig through a spreadsheet is the last thing you want to do. But spending an hour once a month is better than wasting an entire weekend on tracking things down during tax season. Grab a snack, put on your favorite show in the background, and remember that you’re doing your future self a favor.
Save transaction info immediately.
As soon as you make payments for things like loans or property taxes, go ahead and save the receipt somewhere safe. Whether you have a specific folder on your computer set up for the season, or you print everything out and keep in the same physical location, make sure to have a system that makes saving the transaction quick and easy.
To make things even simpler, if you’re working with your local FBFM office, you also just send documents straight to your Farm Business Consultant. We can organize everything and keep on hand for tax season.
Don’t feel like you have to do everything alone.
If recordkeeping still feels like pulling teeth, don’t be afraid to delegate it. Handing off these tasks to a trusted advisor at FBFM can lift a weight off your shoulders and get you back to the work you enjoy most.
How FBFM can help
Whether you want basic monthly bookkeeping support or want to hand the reins over for full farm management, FBFM can help. And for growers who still handle all their recordkeeping themselves, FBFM offers analysis tools to help turn those records into insights and better financial decision-making.
Connect with your local FBFM office to learn more.
