As you’ve gone through this most recent tax season, what was the state of your farm books? Did getting things ready for your tax preparer mean hours or days of work from past months? Or maybe your books were already in amazing shape and ready to go. I’d imagine tax time has gone more smoothly for you then.
Several ag financial gurus think a day is soon coming when banks will require certain farmer clients – those who have crossed a particular threshold of gross revenue – to provide ‘audit-ready’ financials: highly detailed, accurate, up-to-date farm books that may be given an actual, yearly audit. I believe things are heading that way as well.
If your banker were to call you up tomorrow and ask for that degree of financial data, would you be able and ready to provide it? Or would you need to ask for time – maybe a lot of time – to get all the information pulled together?
Audit-ready farm books and financials are something to be proactive about – as in having them ready before the lender even asks or requires them. Why? Because it will ‘wow’ your banker and show them that you take your farm’s numbers and data seriously. They’ll see you have the commitment and dedication it takes to run a farm business by the numbers.
Making sure your books are up to this standard can also improve the relationship you have with your banker. They’ll appreciate the detailed data and your promptness in providing it – and that may even help to increase trust between the two of you.
Having up to date financial information in your books at all times can also help you, as the farm’s CEO, in your decision-making process. That data helps when it’s time to make a major decision for the farm. You’re able to study the facts and understand your options as you look at the farm’s overall financial picture.
Become a star
Lenders want to work with farmer clients who are proactive, who commit to creating plans for the future and have the drive and diligence to follow through. Bringing your books and recordkeeping practices to a greater degree of precision now could help you become one of your lenders’ star clients. Wouldn’t it be great to have that type of partnership with them?
Maintaining detailed financial records for the farm may not be something you’d love to personally spend hours on each day. But if you believe it’s important to be prepared with this information, you may want to hire another person who enjoys dealing with details to do this for your operation – whether that’s someone on or off-farm.
Having someone dedicated to keeping the books up to date and to audit-ready standards is not only a smart idea, it’s a logical one. The right information – at the right time – can help as you design the future you want for your operation. Investing in high-quality financial data for the farm can lead to better decision-making and lender relationships.
We’ve helped many farmers move their recordkeeping to a higher, more precise level. If you’d like some help with that, get in touch with our advisors to discuss where you’d like to take your operation.
Read the most recent issue of the Smart Series publication, bringing business ideas for today’s farm leader. This issue includes perspectives on what to do when a landlord asks for higher rent, how to find the right new employee, a farm business checklist for the spring season, and more. Get your free online issue here.
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.