Four Records Needed for Year End Financial Reporting Date: 12/16/2015 12:00:00 AM Author: Cathy Olson Educational Opportunities: Articles Interests: Grain, Dairy, Swine, Beef, Young, Beginning Farmers, Specialty Industries Home > Education & Events > December 2015 > Four Records Needed for Year End Financial Reporting Share: As with most businesses, financial records are a farmer's best friend. While not as enjoyable as field work or caring for livestock, keeping your financial records healthy is just as important to your operation. There are multiple levels of meaningful information relative to financial reports. They range from the basic balanced checkbook records to the complex records that track enterprises with intercompany transactions and tie to the end of year balance sheets. 1. Records for Tax Planning: It’s typical for grain producers to complete their tax planning for the year in December. They will update their check registers and categorize revenue and expenses to provide a summary for the tax preparer. These tax basis records provide cash flow information but lack true profitability information. 2. Income Statement: An accrual based income statement tracks changes in inventories, account payables, account receivables and other accounts. The income statement ties to the retained earnings on the balance sheet. This type of reporting level provides you with the financial story of the business for the full year. The preparation of these reports at the end of each year gives you consistency in your reports so you can track trends and better understand the business’s ability to generate profits. I emphasize the word “end” of year since a lot of financial activity can happen the last two weeks of December and the first two weeks of January. 3. Enterprise Analysis: Many grain producers also have other income generating enterprises such as hog, dairy, cattle, seed, trucking or others. Tracking the profitability of each enterprise can get more challenging as “sales” and “purchases” from one enterprise to another enterprise may not be reflected in the checkbook. However, to understand where your money comes from and which enterprises are considered profit centers or cost centers requires another layer of management information from which decisions can be made. 4. Balance Sheet: Preparing solid yearend balance sheets takes time, energy and commitment. Balance sheets should reflect what the operation looks like on December 31 or January 1 from year to year. The balance sheet accounts such as cash, inventory, loans, and investments should tie to the source documents after adjusting for outstanding transactions that have been booked but have not yet been recognized on these statements (example: outstanding checks written out on 12/31). The inventory accounts should include details regarding the type of inventory at either the contracted price or the year end cash price. List account payables, prepaid expenses and account receivables. The liability section should include details for each loan such as balance, interest rate, current portion, payment amount and maturity date. The payment information can be included in the budget for the upcoming year. Getting Started: All producers have different levels of interest in preparing financial reports. Some are hands on and others prefer to outsource. There are many financial softwares, models and templates available for people to use in financial reporting. Your lender, accountant, or financial advisor may also be a resource. Regardless of how you choose to prepare your financial records, invest the time and energy to get comprehensive end of year financial reports that can provide you with management information for years to come. Comments There are no comments. Leave comment Name: Email: Comments: Enter security code: Cathy Olson - Senior Credit Officer Articles What to Expect When Applying for Life Insurance Videos Share Farm Financials with your Ag Team Articles Post-Harvest Checklist for Better Farm Management Articles Is Ag Leasing an Option for Your Farm Operation?