As farmers look to become more efficient in all aspects of business, financial record keeping is an area that can be made more efficient with computer record-keeping software.
Computerizing farm financial records can help a farmer gain efficiencies and enhance financial analysis.
With a computerized, farm record-keeping system, the record keeper can use software to store information, summarize data, generate and print reports and sort transactions into categories and subcategories.
Data storage is a valuable component to a computerized system. The data entry process may take you as long as in a hand-written system, but the time saver is the summarization and report generation of monthly and year-end data.
Organized input. As in any system, good records and reports result from the data entered.
The record-keeping system can only summarize and report what you have entered. Carefully consider the way you organize data in order to optimize output and reports.
There are many components to a farm record-keeping system, including transactions and the end results you generate for your management team.
Your receipts and expenditures should be entered in a timely manner, complete with detail appropriate for the results you want to generate.
For example, you should include detail on bushels of grain sold with your grain receipts if you want to know the average price per bushel received at the end of the year.
Various types of information you can develop from a record-keeping system are: schedule F information (cash income basis), data for tax reports, enterprise records, credit accounts, financial statements (net worth, income statements, cash flow), depreciation records and farm business analysis.
Quicken. Quicken is an easy-to-use, computerized record-keeping software package that enables you to keep detailed farm financial records. Think of it as your checkbook. It can also be used to track a total of 10 different account types, including asset, liability, and all bank accounts.
Quicken enables you to keep basic cash receipts and expense records, and provides financial data to you, your tax preparer and other members of your farm management team.
Other Quicken features include easy account reconciliation and income and expense budgeting.
Quicken reports that may be generated include income statements, cash flow reports, enterprise summaries, personal and business income tax reports and others.
Although Quicken does not easily track inventories and does not allow you to keep depreciation records, inventories may be kept on a separate spreadsheet and depreciation records can (and probably should) be kept current by a tax professional.
Which version? A commonly asked question is, “Which version of Quicken should I purchase for my farm records?”
Quicken offers five different versions for 2006 – Quicken Basic, Quicken Deluxe, Quicken Premier, Quicken Home & Business and Quicken Mac.
While each product has different features, the basic program, Quicken Basic 2006, will perform most farm record-keeping tasks adequately. In most cases, the basics needed to begin your farm record keeping will not change with a newer version.
Newly updated, the Computerized Farm Record Keeping with Quicken 2006 Self-Study Manual is written for Quicken Basic 2006, and is now available as an online Ohio State University Extension bulletin at http://ohioline.osu.edu/b925/.
Another common question is whether the Quicken Home & Business version should be used for farm record keeping instead of Quicken Basic.
If your farm business requires creating customer invoices and statements and includes accounts payable and receivable, use Quicken Home & Business, which can also generate accrual-based profit and loss statements if the program is set up and used properly throughout the year.
(The author is the leader of production business management in the Ohio State University Extension’s department of agricultural, environmental and development economics.)