Four ways good bookkeeping makes farm life easier (especially when someone else keeps them)
Back in the first few months I was working full time with Good Agriculture, we were preparing some content for a webinar on bookkeeping, and my cofounder asked me if we could use my farm’s books as an example. I said of course, and I shared the Google Drive folder with all the spreadsheets I’d been keeping over the years.
About 20 minutes later, Alex came back with, “So, this is a great series of one-off analyses, but it doesn’t appear that you’ve actually done your books. At all. In seven years.”
Me: You mean that projecting all the money I’ll make each year and then scraping something together for tax season isn’t keeping my books?
I became Good Agriculture’s second financial services client, and my books have been spotless ever since. I’ll admit, I still don’t know what goes into managing them each month, because my interaction with them consists of a monthly email asking me to identify a few transactions that fall outside of my routine spending. I pass the annual reports over to my accountant, and most of my attention goes to the day-to-day of my work at both Good Agriculture and my farm.
Is this ideal for my farm business? Probably not — my books would definitely benefit from more of my personal attention. But having my books in order has made it way easier to deal with some of the other business operations of the farm. In this article, I’m going to go through some of the ways having clean books has helped me over the past two years.
Example 1: taxes. These have always been a royal pain, and my accountant has been worth more than her weight in gold over the past several years. Until I started with Good Agriculture, I guessed my way through the numbers she asked for, and she somehow turned my mess into something that would be accepted by the IRS. This year I shared the final reports with Good Agriculture, we had a 15-minute phone conversation, and I signed the returns.
Example 2: NRCS programs. I’m lucky here — I have a good NRCS agent, and I’m working with her to get a well put in on my property. The paperwork was still confusing, but I was able to hand over my end-of-year reports and my tax returns to certify my eligibility.
Example 3: cash-flow analysis. My farm grows u-pick strawberries, and next year I’m adding u-pick flowers. The season lasts 8-12 weeks. It’s part of how I can manage to both run the farm and work with Good Agriculture. But since all my money comes in at one time, and the expenses continue throughout the year, I have to be careful about how I pull funds out of the farm and what investments I make in the off-season.
This year, for example, the neopetaloptosis outbreak in the nursery industry in Prince Edward Island has forced me to shift funds from purchasing strawberry plugs to buying misting equipment and starting my own tips from local cuttings. Part of my package from Good Agriculture includes projections of expenses over the full year, so when things come up I can check to see how my remaining funds are committed and what I can afford to try.
I can also see if I have cash shortfalls in any given month and make plans for covering that shortfall. In this year, with some new advertising I’m planning, I’m going to run out of money in March, so I’m setting aside a portion of my outside income now to make sure I can get through to the start of strawberry season in April.
If I were not in a position to cover those two months of farm expenses, having my books in order would be essential for going to the FSA or an ag lender to get an operating loan. No lender will agree to give money to a business that doesn’t know what’s coming in and out on a monthly basis; how would they have any assurance that the money would be repaid?
Now, I’m not saying that everything has been sunshine and unicorns now that I have accurate bookkeeping. Seeing exactly how much money I’m not making in a given year is, quite honestly, depressing. But knowing gives me a base to build off of, and that leads to Example 4: a business case. Knowing that my strawberry production was going to depend on an entirely new process I’d never done before, I opted to work with Good Agriculture to look at what my expenses, risks and potential returns would be if I added u-pick flowers to my u-pick strawberry fields.
We looked for potential competitors and found only one farm doing flowers for u-pick inside city limits and several outside of the Atlanta perimeter — suggesting that there was space in the market. I already have the germination chamber and heat mats from my years growing vegetables, and seed for about a dozen easy-to-grow u-pick flower varieties was only about $200. We did some research on u-pick flower pricing and built out a model that let me see the impact of various price points, seasons and customer volumes.
In the end, I chose to run with a season that overlaps my current strawberry season, and I’m in the process of starting seeds now (October) with the intent of having flowers for Mother’s Day. Assuming that goes well, I’ll start advertising flowers in March. With any luck, I’ll have enough strawberries to pull in my regular customers, they’ll be willing to join some new folks in picking flowers, and I’ll see my income increase by about a third over just maxing out my strawberry production. If the strawberries tank, I’ll still have the flowers to sell and should be able to hit my income goal of about $100k on a half acre. If both the strawberries and flowers tank … well, I’ll be up the creek without a paddle, but that’s the risk we take each year as farmers, right?
All this to say, I’m terrible at keeping my own books — that’s exactly why I have Good Agriculture handle them for me. But having accurate books, regardless of who maintains them, just makes life easier. From streamlining tax season to simplifying government paperwork, tracking cash flow, and planning new ventures like my flower field, good bookkeeping takes a lot of the headache out of the business side of farming.
Sure, sometimes the numbers tell uncomfortable truths about farm profitability, but at least now I can see those numbers clearly enough to do something about them. And that’s worth every penny I pay to have someone else handle the spreadsheets.
Kirsten Simmons is the co-founder and Chief Farming Officer for Good Agriculture (goodagriculture.com), a company dedicated to helping farmers find funding, manage finances, reach new customers and get certified. She also farms at Ecosystem Farm in Atlanta (ecosystemfarm.com).
