The Management Calendar

Farm Business Management Update, October/November 2005

By Gordon Groover (xgrover@vt.edu), Extension Economist, Farm Management, Department of Agricultural & Applied Economics, Virginia Tech

Farm business managers should consider putting the following activities on their management calendar for October-November.

• Once the crops are harvested, get the farm financial records summarized, updating the third-quarter cash flow and comparing it to your projections. Watch for problems. Actual inflows or outflows that differ from your projections may not signal a problem, but understanding why you have differences helps you understand changes in the farm business.
• Using the last three quarters of cash flow and financial records, estimate total farm expenses, income, and capital purchases and sales. Then make an appointment with your tax advisor to plan year-end tax management strategies. Be sure to estimate crop insurance payments and any government payments that will appear on this year's taxes. To take full advantage of year-end tax management strategies, farmers must make decisions before December 31, 2005. Be sure to review changes to state and federal tax laws with your tax advisor to make sure you have not missed deductions and/or credits.
• Farm business managers should never loose sight of the two objectives of tax management: 1) all decisions, including tax management, should be made to improve the long-term survivable and profitability of the businesses, and 2) tax management tools are used to level out the year-to-year swings in reported income and subsequent taxes paid. You can use the multitude of tools and techniques written into the tax code for farmers and all businesses to manage income and expenses to even out the wide swings in annual profits and losses that many farmers experience. Leveling out the income tax liabilities year-to-year will lead to lower total taxes being paid.
• Be sure to keep crop records up-to-date during harvest: include yields, machine times and equipment used, weed problems, and differences in hybrids. If you're moving up in the information age, consider the fully integrated record keeping systems using yield monitors, GPS, handheld computers, and management software on your office computer. One example of this whole farm system (includes accounting, personnel, and livestock records add-ons) is FarmWorks at http://www.farmworks.com.
• Be sure to keep livestock records up-to-date during fall sales. At a minimum, include weight, grade, sale prices, and identification numbers of all calves sold and/or purchased.
• Be sure to check on crop insurance policies. A list on agents in your area can be found at the following site: http://www3.rma.usda.gov/apps/agents/. Check the following web site for closing dates for all insurance policies: http://www.rma.usda.gov/data/sales-closing-dates/

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