bookkeeping; management

Farm management: Manage your bookkeeping

Stay on track with your daily, weekly and monthly financial record-keeping. A farmer must keep up in all the aspects of his operation and good administration is probably a lot easier than you think it is.

Keeping the farm books is right at the core of running a successful agricultural business. It’s critical to know how profitable your farming operation is no matter how small or how big a farmer you are.

Bookkeeping, administration, filing and recording financial transactions every day may not be your ‘thing’ as it was not mine when I farmed. I found it infinitely more rewarding to check on heifers or calves or walk pastures than to check on the weekly and monthly accounts. The truth is – I was wrong. The books must be up to date to keep the farm running smoothly and if you don’t file the bits of paper, you lose money.

The trick is to see ‘office time’ as another farming job and not as a separate activity, that you will do if, and when, you have the time.
There are four basic sets of bookkeeping files: income, expenses, bank statements and cash flow statements. These files give you the information you need to manage and control your finances. If you are not attending to them, your business is heading for trouble.

File management is easier if you manage the records from the beginning to the end of the financial year. If your financial year runs from March to February March will be at the back of the file and the months after that on top of March. This way you see the most recent records first.

South African farmer Hannes Horn at work in his farm office. Farmers that are not committed to getting the paperwork done will find themselves in trouble soon enough.

INVOICES

You need an invoice when you have sent off an item, with a delivery note, to a client who pays you later. Let’s say you deliver vegetables three times a week to a local supermarket that pays you at the end of the week, each delivery will go with a delivery note. At the end of the week you invoice your client, showing all three delivery note numbers on the invoice. When the supermarket pays you, mark the invoice as having been paid and the date it was paid, then file it with the relevant delivery notes in that month’s income file.

INCOME

The income file tells you how much money comes in, from whom, and when it comes. There must be a record of what you sold, who you sold it to, how much money you received and when you were paid.

Make a simple rule that nothing leaves the farm without a document that gives you this information. It is fundamental to any business to record sales.

  • A delivery note, without prices, can go with farm produce simply to record what you are sending.
  • An invoice with price details and delivery note numbers can accompany farm produce to the client.
  • When it’s a cash sale you can give the buyer a cash sale note which will show what you sold, how many units, the price and the total paid. It may also show the customer’s name.

For example: When you take livestock to an auction, use a delivery note giving the following information:

  • Delivery note number and date
  • Your name, address and contact details
  • The name of the auction house (or buyer)
  • Description of animals eg. 2 Brahman crossbred steers 20 months and their tag numbers or brand mark or 7 Boergoat ewes 10 months old and their tag numbers.

When the auctioneer (or buyer) pays you after the sale, attach the record of payment to your copy of the delivery note and file it in the income file for that month.

EXPENSES

The expenditure file tells you what you have bought, from whom and how much you paid for it. Use the expenses file for completed payments so you don’t confuse those that have still to be paid with those already paid.

It is a good idea to have a separate payments due file where you can store invoices and statements you receive, until such time as you have paid them when they will go into the expenses file.

When you pay an account write down the amount and the date paid on the invoice before you file it. This applies to cash and electronic payments.

If you paid cash you should have a cash sale note or an invoice from the company where you bought the item. Put the record into the expenses file.

If you have many suppliers you might want to arrange them separately in the file instead of in the month. Just keep the oldest record at the bottom and the most recent one at the top of the file.

BANK STATEMENTS

The bank will send you a statement at the end of every month. The statement shows you how much money came into your account and how much went out. It also shows bank charges and interest charged on your overdraft.

When you go through the bank statement tick off the income and expense items against your records. You could write the invoice number or cash sale number next to the deposits.

The bank statement shows you how much money you have to cover any outstanding payments you must still make.

You will also see cash withdrawals and cash deposits made, on the bank statements. Write the invoice number or cash sale number next to the deposit listed on the statement.

Write the deposit date shown on the statement, on the invoice in the income file. This is called cross-referencing and it makes life easier for everyone working with the financial records.

Keeping these files up to date and in order will give you better financial control of your business.

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