Farm Records Damona Doye OSU Extension Economist damona

Farm Records Damona Doye OSU Extension Economist damona. doye@okstate. edu

Records n Why? n Who? n What? n When? n How?

Record keeping goals n Be prepared for the unexpected n Planning ahead n Communications n Business analysis q Be able to accurately identify shares of income and expenses q Determine costs of production per unit q Know where profit (and/or loss) centers are in the operation n Keep what is needed for tax purposes

Preparing for the unexpected n Know your net worth, debt position, potential liabilities, cash reserves, cash flow and margins n Other records: q Durable power of attorney q Will, trust q Medical directives q List of account and credit card numbers q Asset and liability inventories n Farm and household q Proof of ownership, coverage, warranties q Beneficiaries

Identity theft: deter, detect, defend n Receive and review credit reports once per year q https: //www. annualcreditreport. com/cra/index. jsp n Review your credit card statements carefully n Keep important records secure q Shred q Use passwords on electronic files n Federal Trade Commission: http: //www. ftc. gov/

Planning ahead n Spending plan n Retirement planning q Current records q Idea of future expenses n Estate planning q Asset and liability information q Cost and market value

Communication n Business partners n Lenders n Landlords n Heirs n Family

Business analysis n Historical analysis n Current assessment n Forward planning n Financial performance n Financial position

Records are the foundation…. AGEC 751 Cash flow statement Income statement • Cash income • Cash expenses • Changes in assets AGEC 791 792 752 Balance sheet • Changes in liabilities • Assets • Net farm income, accrual adjusted (profit) • Liabilities • Net worth (owner equity) http: //pods. dasnr. okstate. edu/docushare/ AGEC 753

Profitability Group

Trend analysis 2014 2015 2016 Seed $2, 500 $2, 600 $2, 700 Fertilizer $10, 000 $4, 000 Fuel $3, 200 $5, 500 $3, 100 $500 $1, 500 $5, 000 10% 12% 17% $45, 000 $55, 000 $95, 000 … Repairs … Interest as % of total expenses … Credit line

• Family Living Expenses • 80, 000 • 70, 000 • 60, 000 • 50, 000 • 40, 000 • 30, 000 • 20, 000 • 10, 000 • 0 • 2004 • 2005 • 2006 • 2007 • 2008 • 2009 • 2010 • 2011 • 2012 • 2013 • 2014 • Average: • Food Purchased • Household Operation • House Upkeep & Repairs • Personal - Recreation • Gifts • Contributions • Doctor - Other Medical • Health Insurance • Life Insurance • Auto Expense • Utilities - Telephone • Other http: //www. agmanager. info/KFMA/ • 2015

Records for tax purposes n “It is easier to do a job right than to explain why you didn’t. ” … Martin van Buren n Cash records q Farm income and expenses q Employee payroll q 1099 q Asset sales and purchases q Keep most items 3 -7 years n http: //www. irs. gov/, Publication 225, Farmer’s Tax Guide

What do good records offer? n Unbiased truth n Insights into strengths/weaknesses, problem identification n Identification of profit and loss centers n Direction for maximizing the returns to owned resources n Documentation to obtain/maintain credit n Ability to compare to benchmarks

What do good records offer? n Information regarding feasibility of new ventures n Employee incentive measures n Guidance on appropriate risk management strategies q Production risk q Financial risk

Some suggestions… Start simple Be consistent Be disciplined Get assistance Be enthused!

References n At osufacts. okstate. edu: q From Cash Records to Cost of Production, AGEC-242 q Quicken for Farm and Ranch Financial Records, CR 324 q Quicken or Quick. Books: What’s the Best Choice for Agricultural Producers? AGEC-266 q Information Systems for Oklahoma Farmers, AGEC 302 q The Oklahoma Farm Family Account Book, E-823 n www. agecon. okstate. edu/quicken n www. agecon. okstate. edu/farmbook