The plain and simple truth is that if you don’t track financial information by crop, farm, field, and land owner, you are just guessing whether you are making the right decisions regarding your farm. On the flip side, when you are tracking it, you can also do “what if” scenarios that open the pathways to making better business decisions. “What if” scenarios can help you:

• Compare the profitability of individual production years regardless of crop/livestock.
• Determine which products to continue producing by comparing the profit per acre/head of each crop/livestock.
• Determine if fields/livestock are not producing to their potential.
• View the break even cost/bushel for each field in a production year.
• View the profitability of a field regardless of which crop it raised over a period of time or determine if it is more profitable to raise feeder hogs or farrow to finish.
• Analyze and compare profitability between profit centers, farms, and production years or any other combination of business segments.

If you track inventory, it will provide you with more accurate profitability analysis. If you aren’t tracking inventory, then you can’t really do accrual accounting, so you just expense your supplies (seed, fertilizer, etc.) in the year you purchase it. But that might not be the same year that you use it, AND it may not be the same year you sell the crop. So you could have the expense in one year and the revenue in another year… thus throwing off profitability for each year.

You can decide how detailed you want to be with tracking crop production…

• Start really basic – just do production tracking by crop, farm or field, or a combination of crops & farms or by land owner.
• Once you are comfortable with that, you could expand the next year (or whenever you feel comfortable doing so) and start tracking inventory.
• Then once you are comfortable with that – you can start using WIP (Work In Process) accounts and doing accrual accounting (and getting more informative and meaningful financial reports).

Is your farm running less efficiently than you would like it to? Are you confused about what to do about it? Sometimes we are painfully aware that we have financial issues, yet we are too overwhelmed to know where to start. Running a farm is no different—there are so many things to think about in times of financial distress, that it’s hard to know where to start fixing things. That’s why it’s good to be able to run “what-if” scenarios

Creating “what-if” scenarios in your farm accounting software can help you project future sales, cash flow, income statements, and assets and liabilities. You can then in turn make good plans and decisions for your farm’s future.

Compare “what-if” budgets with actual and projected figures years into the future. Once you start tracking and running this information, your farm operation will begin to operate more profitably.

Creating a budget for your farming operation may seem like a daunting task at first, but it can make a big difference in the profitability of your operation. You can choose to create a budget by hand, by using a spreadsheet, or you can use your farm accounting software to help you. Either way, the outcome remains the same: increased confidence in decision making and increased profits for your farm.

A budget provides guidelines to help you organize and control your financial resources and also helps you uncover your operation's strengths and weaknesses. Have you ever come face to face with a large purchasing decision, and then made that decision based more on emotional "wants" and not on the actual business need? If so, you are not alone. Unfortunately, this method of making purchases does not take into consideration every aspect of your farming operation. By setting up and following a budget, your purchasing and buying decisions can be made more confidently, and can keep your operation growing strong.

The process of managing a budget involves examining your historical data, to show you which areas in your operation are generating the most profit and which areas need attention. With this information you can easily make long-range projections and increase your profits through better decision making.

A budget also helps you gain control of your finances and gives you the tools you need to project future cash flow and helps you manage your assets and liabilities. A budget helps answer the "what if" scenarios such as buying more land, expanding a crop, purchasing new equipment, etc. Planning your future business strategies becomes easier with the information a well thought out budget can provide.

Creating a budget can provide smart decision making for your farming operation, which can lead to more confidence and increased profits.

Many farmers spend thousands of dollars to improve production, but hesitate to spend money on tools that can help them improve their financial management. In fact, managing farm finances offers the best possibility for adding profits and ongoing profitability to an agricultural operation. Consider these reasons why financial management is crucial to the success of your agriculture operation.

GOALS: You cannot meet a goal if you don′t set one. Setting goals is a crucial aspect of maintaining a business. Whether your goal is to grow by a certain percentage over a certain period of time, retire early, or simply keep your operation running successfully, any of these goals are more easily achieved when a plan is there to back up the goal. Then, once your goal has been set, progress toward your goal must be constantly checked and evaluated. Your financial management tools can help you manage your progress, by using reports within your system.

SMART DECISIONS: Smart decisions lead to more profits. Using the information on reports within your financial management system can help you make the best decisions possible: ones that are based on real numbers and facts rather than feelings and assumptions.

Thousands of Red Wing Software customers understand the benefits of using agriculture-specific software to manage their farm, rather than using a more basic program. Here are some compelling reasons to think seriously about implementing agriculture-specific farm accounting software instead of a more general program. Keep in mind that agriculture-specific accounting software will include the basics you need such as writing checks, entering payables and receivables, and managing your general ledger. Below are the additional tools Red Wing Software’s CenterPoint Accounting for Agriculture offers to help your farm see its true potential!

1. Multiple Quantity Inventory Tracking:

   While basic programs often don’t allow for any inventory tracking, CenterPoint for Agriculture allows for inventory tracking in multiple quantities, so you can keep better track of your items no matter how you buy or sell them.

2. Multiple Tax Entities:

   Allows you to track multiple tax entities in one database for keeping financial data separate, yet still perform combined business analysis when necessary.

3. Book, Market, and Tax Asset Value Tracking:

   Know the true value of your assets for whatever purpose you choose.

4. Transaction Distribution to Multiple Accounts:

   Easily distribute complex transactions across multiple accounts and production units, for an accurate financial picture.

5. Information Tracking for Farms, Fields, Landlords, etc.:

   Always have access to information at your fingertips about your farm, land, etc. for yourself and your managers, landlords, bankers, and more.

6. Ratio Analysis:

   Calculates ratios for your farming operation and shows trends, so you can address issues and become more profitable.

7. Production Analysis:

   Provides detailed crop and livestock information on a cost per unit basis.

8. Financial Analysis:

   Owners and managers can get in-depth financial analysis with unlimited ability to structure and segment entire operations, profit centers, accounts, and inventories to track data, combine entities, and receive the most relevant farm reporting available today.

9. Budget and Forecasting:

   Gain the ability to create “what if” scenarios for your farm, and you’ll be able to project future sales, cash flow, income statements, and assets and liabilities. You’ll then be able to more accurately plan for future business strategies!