Considerations for accounting for your agribusiness
Agriculture is unlike any other business and finding a knowledgeable accounting firm can help your agribusiness operation. If you’re only utilizing a tax accountant once per year for your operation, know that a farming business CPA can help you to navigate financial management, regulation, and subsidies. Managing your farm’s finances is important to ensure that your business is profitable, that you are increasing your net worth, and that have adequate cash flow. Here are some considerations when accounting for your farm business:
1. Adjust your calendar to align with the government. Adjusting your calendar to coincide with the government’s definition of significant dates will help to reduce headaches in calculating financial information, crop dates, and livestock ages.
2. Keep track of your profits. Tracking profitability of your farm is not simple, but monitoring month-to-month will allow you to better track and predict profit and cash flow.
3. Monitor inventory and stock. Maintaining current records of your inventory and stock allows you to keep an accurate value on record.
4. Land is an asset that shouldn’t depreciate. In fact, your land may go up in value. You should always account for maintenance to your land including pest control, weed removal, nutrient management, irrigation, and drainage.
5. Know what should depreciate. New equipment purchases can be a tax offset including computer equipment, small machinery, tractors, vehicles, or other farm machinery.
6. Pay attention to land use. When the use of land changes, make sure you record it in your records to accurately reflect the change at tax time and take advantage of incentives for carbon capture, changing arable land to native plants, migrating pasture to crops, or changing forested land to livestock use.
7. Document losses. Losses happen due to weather, pests, or other catastrophic events and recording your losses accurately can help you to reduce your tax bill. When a loss results in a claim from an insurance policy, be sure to include those receipts in your records as well.
Do you need an accountant to help manage your agribusiness?
MCK CPAs & Advisors has farm accounting professionals who can support you with all of your farm financial management needs. Contact us today to get started.