The beginning of the new year offers us a chance to reset, start with a blank slate, and have the best of intentions for the months ahead. While many of us might make New Year's Resolutions around our health, farm production, and others - I can bet that you've never set some for your farm's financial management!

Farm financial record keeping is an important tool for monitoring the health and success of your farm business. This involves tracking the incomes and expenses of the business, along with inventories, capital purchases, debt payment schedules, and more as it pertains to your farm business. Here are three New Year's Resolutions for Farm Financial Management that you might consider to help improve your farm's financial wellbeing in 2023:

1. State your Who, What, Where, When, Why, and How of record keeping. Setting up a record keeping system may sound easy in theory, but can quickly fall apart as we get busy with all of the things. I would encourage you to answer the following questions for your farm, write the answers down on a piece of paper, and pin them to your farm office wall, breakroom fridge, or truck cab.
   1. Who? Choose ONE person who is the primary gatekeeper of the farm financial records. While it might seem easier, in theory, to spread out the workload - things can quickly fall through the cracks without clearly defined roles. This doesn't mean that one person has to do all of the work, but there should be one person who is making sure all of the work is getting done.
   2. What? Decide what types of records you need to keep based on your farm's operation. This includes farm expenses (usually the total, vendor name, description of purchase, method of payment) and farm incomes (sales receipts, volume/number, purchaser) at a minimum. 
   3. When? Choose a time of the day, week, or month (depending on your farm size and record volume) to be a routine space for financial record keeping. This could be every morning when you stop in at the farm office to print off DairyComp sheets, every Sunday night after you pack kiddo backpacks for school and plan the week ahead, or the first of every month when you're working on your monthly bills. Pick a time that works for you and stick to it.
   4. Where? Locate a place that can be your designated record keeping area. This could be an office desk and computer, an accordion folder with a notebook and a calculator, or a folder in your phone photos where you keep receipts as you receive them.
   5. How? There are a few categories of record keeping methods. None of them are "wrong", and you do need to choose the one that is going to for you - not the one that you want to work for you.
      1. Electronic Accounting: Things like QuickBooks where you are inputting data based on a Chart of Accounts. This is great for clear and easily summarized data, but not great for folks who aren't computer savvy.
      2. Ledger Accounting: This could look like a spreadsheet where you're tracking and tabulating data or a paper ledger book. Data is entered regularly and is categorized. Great for those who are a step away from QuickBooks, but it does require some math and preparing financial statements on your own.
      3. The Shoebox: Also known as the corkboard, the truck dash, and the folded up wallet. This is a centralized (hopefully) place where receipts are kept and, at some point, tallied up or categorized. This isn't the best record keeping system as things can easily be lost in the shuffle and there is no monitoring of financial wellbeing. 
      4. Outsourcing: If you know that record keeping isn't your strongest skill, outsourcing is a viable option! You do have to pay for this service, but you can oftentimes make up for this expense by having up to date and efficient financials for your farm business.   
   6. Why? Determine why you would like to keep better financial records and state your goal for doing so!
2. Make record keeping work for you. After talking to several farms about record keeping over the years, I think there is this idea out there that record keeping isn't worth investing time in unless you can do it "perfectly". However, any effort towards keeping financial records will benefit your business at the end of the day. Instead of trying to have the perfect, color-coded, financial accounting software with all of the bells and whistles, try starting small with a system that will work for you. You're not doing this for "fun", so having a system that is intuitive and meets your needs should be the priority! The main way, in my experience, that record keeping can work for you is by getting you the information you need to make sound financial decisions. Things like your current debt to asset ratio, your net farm income with and without owner/operator labor and management, and your cost of production are key financial indicators. If you've got solid records, these numbers are easy to get to and can help you with decision making!
3. Celebrate the small wins! Farming is full of too many hard decisions. Rarely do we take the time to celebrate the little things, and record keeping is a great way to share some positive vibes on your farm. Did you get caught up on entering your receipts? Recognize that you just completed a task that will help improve your farm business! Pay all of the month's bills on time and without any overdrafts? Wow! You're awesome! Put together a balance sheet for your lender without too much sweating and swearing and trudging through the snow counting round bales? Gosh - you did the hard work and now you're reaping the benefits! Give yourself a pat on that bat when it comes to competing record keeping tasks.

Here's to a safe, successful, and (hopefully) profitable 2023! If you need any assistance with setting up a record keeping system that works for you, preparing financial statements, OR would like to participate in a financial benchmarking program, please reach out to Katelyn Walley-Stoll, Farm Business Management Specialist, at 716-640-0522.