By Stephanie Elsen
Keeping track of financial information for your farm is crucial to generating profits. Tracking that information allows you to analyze the numbers, so you can see what’s working and what needs improvement. If you are currently using manual methods or a very basic bookkeeping program, you can benefit by taking your farm record keeping a step further. You might be amazed at the results and growth you will experience by analyzing your numbers, and basing your decisions on those numbers. Here are some of the advantages to upgrading your financial management system.
Easily provide your banker with any documents needed.
An agricultural financial management system, when used properly, allows you to keep track of important information. When you need to provide documents for loans or loan renewals, that information is already stored within your system, so you can pull up reports such as a balance sheet or income statement with ease.
Plan for profits.
Knowledge is power, and when you have accurate information available at your fingertips, you are able to plan for future profits based on actual history, using tools like budgeting, asset information, and cash flow analysis. None of these are available with manual record keeping methods.
Track each enterprise as its own entity for analysis.
With manual recordkeeping, it can be hard to know how each area of your operation is performing. By implementing a computerized farm record keeping system, you will be able to see which of your profit centers are performing poorly and either improve or eliminate them. Also, knowing which areas are performing well will give you insight into what you should continue to focus on for maximum profits.
Distribute expenses to the right profit center.
Wondering what your true cost of production is? Understanding your cost of production gives you valuable insight that makes it easy to see where cost cutting or pricing adjustments are needed. Using a good Ag financial management tool allows you to distribute costs to multiple profit centers or production centers from one transaction, so you can run reports and understand your true cost of production. And with this information in hand, you’ll be on your way to increased profits.
As with any process or system, you get out of it what you put into it. Using a better financial management system for your farm record keeping, and making sure you keep it up to date, will send you on your way to increased profits. With your effort and an Ag financial management tool, you can improve your farm’s profitability and be more confident in decision making for your farm.