Farm Management Accounting Software
Tips & Advice to help you make your decision on Farm Management Accounting Software
When you think of farming you likely picture crops and livestock instead of a computer, but bookkeeping and accounting is a very important part of running a successful and profitable farm. Farm management accounting software is designed specifically to help farmers keep track of the expenses and income involved in running a farm as well as keeping the organization organized.
Consider how many things a farmer needs to keep track of outside of growing crops and raising livestock. There are seed costs, equipment maintenance and purchases, labor, veterinarian expenses, inoculations, storage of crops after harvest, sales and many other pieces of financial data that a farmer needs to track and be aware of. Think of how many ledgers a farmer may need, and when tax time rolls around imagine just how many receipts and piles of paper a farmer would have without using a computer accounting program to manage the farm finances and inventory.
Choosing farm management accounting software isn't difficult, it's just a matter of know what you need to track and having a basic understanding of how the software works. Of course once you have your accounting software in place, you actually have to enter the information before it can track it for you. So a farmer at the computer desk should happen at least once a week! It can be a big step to move from a pen and paper accounting system to the computer but the software programs make it easy and efficient to handle your farm accounting.
?Farm Management Accounting Software Key Terms
Understand the terms companies use in farm management accounting software to choose the bestBy Shannon Tani Farm managers looking for an accounting software program to help manage expenses have several from which to choose. Before choosing a software program, farm managers need to make a list of the things that they require in a software program and then make sure that the software has those capabilities. If they want to make the best decision, managers should know certain terms to better understand the software features.
Equipment depreciation
Equipment depreciation occurs as farmers use their equipment. Over time, the value and usefulness of machinery depreciates due to use, rust and general wear and tear. It's important for farmers to track equipment depreciation because they may be able to use it as a tax deduction.
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The University of North Carolina offers an extensive article on farm equipment depreciation.
Cash flow statement
A cash flow statement, or cash flow plan, allows you to see where your money comes from and goes to over a period of time. This helps you to plan for large purchases or to better manage your money. Farm accounting programs should be able to create this automatically from data you enter.
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For a lengthier description of a cash flow statement, check out the Business Owners Toolkit.
Accrual and cash methods
The accrual and cash methods are two different ways that you can handle your accounting. In the more popular accrual method, business owners count their income at the time that the transaction occurs. In the cash method, they do not count the income until the customer pays the cash.
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Look to Nolo for descriptions and examples of the cash and accrual methods.
P&L statement
A profit and loss statement, also known as a P&L statement, is essential for any business. It shows the business owner where he or she made profits and where there were losses.
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eSmallOffice gives business owners step-by-step instructions on how to create a P&L statement, including an example.
Inventory management
Any good farm management accounting software should provide inventory management capabilities. Inventory management is keeping track of a company's inventory, including when new stock comes in or goes out.
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Look to InventoryManagement.com for a more detailed description of inventory management and a discussion about what inventory management software should do.
Schedule F
The schedule F is a profit-and-loss statement for farms that must be submitted along with taxes. Many farm management accounting software programs allow farmers to easily print out this information.
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Download a PDF file from FedForms.gov (the official site for federal government forms), which offers the instructions for filling out the schedule F.
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