If you haven’t done it already, it’s best to review your cash flow and do some tax planning, says Will Walter, a farm management instructor with the South Dakota Center for Farm/Ranch Management.
Some things he says to consider are:
Overhead costs. Prevent plant may have covered your cash rent or property taxes and some of the pesticides you needed to manage those acres, but many of your overhead costs are still present. Insurance on property and vehicles, fuel outside of planting or harvesting, utilities, labor, machinery depreciation, principle, and interest on long-term loans all still need to be paid even with lower or no planted acres.
Household budgets. On the personal side you still need to eat, maintain a home, pay for health insurance, get the kids to school, etc.
Can some cuts be made in your household budgets? Can cellphone, satellite television, convenience food and recreation spending be trimmed? It will be much too late to adjust expenditures when loan renewal time comes. Do you need to seek some, or more, off-farm employment?
Taxes. You may be surprised at how your Schedule F plays out for 2019 if you don’t do some forecasting. Consider three scenarios:
1. Did you prepay some inputs in December 2018 but may not in 2019 because you have a credit going into next year?
2. Did you sell more of last year’s crop in 2019 than you normally would because you had stored grain and waited for a price increase?
3. If you take a 2019 crop insurance indemnity and a Market Facility Program payment, are you doubling up on income when you will likely have less cash expense because you planted fewer acres?
“These are all points to consider, and they can only be addressed by having your records up to date and correct,” Walter says.
Walter suggests devoting some quality time to bookkeeping — not just when you can fit it in the evening. You may need to call your bank, grain elevator, ag retailer, insurance company and other suppliers during business hours to track down details about potential income and expenses.
For help with recordkeeping tools and preparing and interpreting whole farm analysis, contact the South Dakota Center for Farm/Ranch Management at 605-995-7191 or firstname.lastname@example.org, or see sdcfrm.com.Source: South Dakota Center for Farm/Ranch Management, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.