8 Farm Bookkeeping Mistakes to Avoid
Keeping track of everything going on within your operation is a big challenge. Add in handling your own accounting records/bookkeeping and it can become pretty overwhelming. Here are some common mistakes to avoid:
- Entering Information to the Wrong Account – Verify that your transaction templates are setup with the correct general ledger account in your software program. When creating your chart of accounts, make sure they correlate to your specific business needs.
- Not Breaking-Out Interest from Principal – It’s important to break out the interest from your principal for your loan payment. This will give you a more accurate balance to what is still owed. The interest portion is usually tax deductible, so you will want to show the expense on your income statement.
- Not Reconciling all Cash Accounts and Loans each month - Reconciling your accounts each month, will help in making sure all transactions are accounted for and posted correctly.
- Lack of Documentation –Keep supporting source documents for what you are paying, receiving for income, sales, money transfers, loan advances/payments, and so on. Having this paperwork will help in making sure all items are accounted for and a resource to look at later.
- Cash Sales or Purchases Not Reported – Since they do not come across on the checking or saving accounts, these items may not get expensed or recorded as income. When you have these instances come up, record them right away, so they’re not forgotten or misplaced.
- Payroll: Incorrect Entries/Calculations – (bonus, commodity wages, employee advances). Payroll items need to be setup correctly and subject to the correct taxes. Salary, hourly wages, bonuses are all subject to payroll taxes. Commodity wages are subject to SUTA payroll taxes. If you give an advance, make sure to deduct it from the next payroll check(s).
- Penalties: Payroll Liability Payments – Calculating the correct taxes and scheduling payments on appropriate due dates is critical. There can be hefty fines and or penalties for not paying the correct amount or paying it on time. Know what payment frequency requirement you are on. Are you a monthly, semi-monthly, annual payroll liability schedule and/or filing?
- Patronage Dividends: Depending on the co-op stock patronage, you will want to record the whole patronage dividend amount as income and not just the cash portion. The Equity portion would increase your stock asset account.
With everything you’ve got going on in your operation, it can be tempting to let accounting/bookkeeping slide. Taking time to regularly record and process can reduce headaches and stress down the road.
Get more information or to talk to one of our tax/accounting team members today.