Good recordkeeping benefits small farms

The most valuable lesson I have learned during my first four years farming is the benefit of keeping good records.

Like most farmers, I prefer dirty boots to a perfect filing system. I don’t like to spend time inputting information into a computer. But since startup I’ve seen how keeping better records has benefitted my small farm. I’ve also learned that clear, consistent record keeping is much easier and more efficient than rustling through a box of receipts at tax time.

Today I consider myself a reformed record-keeping farmer. I keep three categories of records: business, livestock and produce. Doing so has made my small farm more profitable and better positioned to grow.

Business

All farms, regardless of size, require sales and expenditure records to file accurate state and federal taxes. The box of receipts I mentioned a paragraph ago became a Microsoft Excel spreadsheet of tax-exempt agricultural purchases. I make a special note of equipment depreciation to deduct at tax time.

Related: Tax filing on the farm: Tips for 2015

Farm fuel and mileage are two deductions small farmers often overlook. But they add up, especially when we’re running the tractor non-stop making hay all summer. Remember mileage traveling to and from markets or transporting livestock is a business expense that can be itemized.

Good records are critical to finding credit and capital to grow a farm. A business plan is worthless without accurate financial information. All Federal Farm Service Agency (FSA) loans, cooperative credit services, private lenders and most grants require several years’ financial records.

Livestock

In the beginning, the only “livestock” on my farm was free-range laying hens. I kept egg sales, feed expenses and state inspection records. When I added meat and dairy goats I found myself in need of an organized system of registration and health records. Additional livestock also meant more income and expenses to keep track of and new livestock association membership renewals.

Large livestock farms use software to keep detailed records and produce reports that guide their everyday operations. State-of-the-art farm software can cost hundreds to thousands of dollars depending on office and field function, making it unfeasible for small farmers. However, basic livestock software that is suitable for small farms can be purchased for less than $150. My small farm software has already proved its worth this birthing season, hosting new records and updated breeding and birthing info.

Produce

The first year I sold produce, the only record I kept was sales. I planted and picked blindly. I relied on my memory of season’s past to rotate crops. As a result, I had no clue how much I was spending to deliver food from farm to table. I didn’t know if my prices were profitable. I was lost when it came time to order supplies for a new season.

I wised up and created a Microsoft Excel spreadsheet to track supply sources, vegetable varieties, planting information, maturity, harvest and performance. Now I can pinpoint profits and losses. Identifying which crops are most profitable made me quadruple production of high value crops (tomatoes) and cease to grow low value crops (turnips).

I open a fresh copy of the Excel template each season. I can reach back to old records at any time to compare seasons side-by-side. I can also sort the sheet by plant date and maturity for a snapshot of produce I will have for market each week.

If Excel intimidates you, download the Farmers’ Legal Action Group (FLAG) free produce recordkeeping tool kit.