Looking for accounting software for farmers?
These days, there are plenty of choices as technologies are evolving fast.
Whether you’re a budding farmer, a homesteader, or a businessman, a farming app can help you set the best financial goals for your future.
I believe farming is way more than a business, it’s a lifestyle for us.
And so, securing a future through our income may be something you want to focus on while producing crops for you… and others.
Here, I’m going to tell you about the best software you can opt for as well as several topics related to farming accounting.
So, without any further ado, let me start by telling you which accounting method is preferred by most farmers and the reason behind it.
What accounting method do farmers use?
Cash base accounting is the common method that farmers usually use to calculate their revenue from expenses.
It’s a universal method for most farmers worldwide to report their taxable income from the farm.
But, today, there are numerous tools and applications to aid this accounting method and help farmers with informed annual income management.
How do you keep track of farm expenses?
You can keep track of your farm expenses with the help of farm management tools and software.
These tools and software come with multiple useful features, helping farmers track their income and cost in a faster and easier way. For farmers, it’s really important to make informed decisions when it comes to farm management, which can be aided by these tools.
Record keeping is essential for any farmer who wants to sustain and make a profit with the annual income. So, you can make the most of these farm tracking resources to ensure success.
These tools can help you with the calculation of your annual expenses, income, and sales as well as setting your financial goals and savings in the right way.
What is agricultural accounting?
Agricultural accounting refers to the complete management of farming accounts, which includes every detail of the cash flow. It is managed by either farmers themselves or agricultural accountants and farming account software.
Agricultural accounting is a dynamic area that includes tax, savings, expenses, profit, loss, estate planning, budget planning, and so on.
The purpose of agricultural accounting is to provide the farmers with proper decision-making ability for their business.
What is farming software?
Farming software is a system comprising a set of tools that includes all the necessary aspects for farming account management. Farming software involves the collection of financial data and the management of this information to help farming businesses carry out their financial operation in the right direction.
The data required for successfully running a farming software could be product price, resources cost, and other inputs related to land and farming. So, if you want to use farming software for your farming business, you need to provide all such details related to your farm. Then, you’ll be able to get a complete understanding of your expenses and profit.
Do farmers use cash or accrual accounting?
As I mentioned above, farmers usually prefer cash accounting instead of accrual accounting. That’s because farmers mostly deal with cash payments for their entire farming business. And so, before year-end, they need to report the total amount of cash received as well as cash paid to the state or federal financial authority.
In the USA, accrual accounting is usually used for federal credit programs. Other than that, most programs including agriculture are estimated with cash accounting. So, for all these circumstances, cash accounting is allowed in the USA by the IRS (Internal Revenue Service).
Which system of bookkeeping is followed to record the farming transactions?
As I said in the beginning, cash base accounting is followed to record all farming transactions.
So, the bookkeeping format involves two main systems, which are known as Single Entry System and Double Entry System.
Here’s a short description of both for your better understanding:
Single Entry System
This system is for managing a creditor or debtor’s personal account. So, this system doesn’t include any transaction’s double effects as well as the impersonal accounts.
Double Entry System
This bookkeeping system includes two aspects of an account, credit and debit entry. Farming business transactions are based on this entry system in general.
What are the 3 basic types of farm records?
Farm records are of multiple types… but, the 3 basic types would be:
- Financial records
- Production records
- and Animal health records.
Other types of records are stock books, receipt registers, cashbooks, data stock, cultivation registers, etc.
What does GAAP stand for in agriculture?
GAAP refers to Generally Accepted Accounting Principles in Agriculture.
For corporate accounting and businesses in the USA, GAAP works as the main standard or principal for evaluating the legalities, and complexities.
The accounting methods to be approved by GAAP are maintained by the FASB (Financial Accounting Standards Board).
What is the biggest expense in farming?
Though it can depend based on the type of farm, the biggest expense is fertilizer.
But, for some farmers who are farming on rented land, it’s the rent. Other determiners of farming expenses are the location, the climate, and the economy of that particular area.
What is the best farm management software?
There are so many options when it comes to choosing farm management software these days.
Here’s a list of the best software I’ve come across:
Trolley
It’s a payment platform allowing farmers to send payments easily to their clients. This one is preferred by large-scale farmers because of the provision to send payments to multiple regions and 200 countries. The app is built with IRS forms, automatic withdrawal updates, and many more useful features.
FreshBooks
With more than 30 million users, FreshBooks is ideal for self-employed farmers and freelancers. The best feature of this app is that it makes the process of addressing accounting problems really easy for beginners. The app is available on both Android and iOS platforms.
AvidXchange
A farm management software equipped with automation, this one can make day-to-day operations effortless. The interface is customizable and there are four modules for managing accounts. The app provides integration with more than 210 accounting and ERP systems.
PayEm
Another great financial management app for farmers, PayEM is all about accuracy. This one supports 130 currencies to be sent to up to 200 countries. The request-to-approval workflow of this app makes it a first choice for many farmers.
NetSuite ERP
This one is apt for medium to large-scale farming businesses because of its precise cost-saving management. EFT facility is another advantage of this useful farm management app. The integrations with NetSuite E-commerce and other third-party apps make it quite a practical choice.
What are typical farm expenses?
Farm expenses include:
- Fertilizers
- Seeds
- Resources such as a car or truck rent, land rent, and others.
These are the common expenses of farm business owners. But, depending on which farm you own, the expenses can differ hugely.
How do I organize my farm receipts?
Organizing your farm receipts is really important to avoid financial mistakes.
And so, you can follow a record-keeping method that works for you. Rural farmers with no access to technologies follow the traditional shoebox method while others use record-keeping software or spreadsheet.
I started following the traditional shoebox method that involved mostly paperwork until I found some excellent accounting apps. These programs are designed to complete the entire calculations based on my inputs.
Whichever method you choose, just make sure you keep all your receipts in one place always.
How do you manage farm debt?
Though managing farm debt seems quite challenging at the beginning, you’ll get a hang of it once you know some useful tips.
First of all, you need to set a budget for your farm so that your financial goal is clear. You also need to evaluate whether the goal is achievable or not. Setting an unpractical goal can make it difficult for you to overcome debt.
Next, you can think of combining all your existing loans to reduce the interest rate. For other loans, refinancing can also be another way of managing debt.
Finally, if you see that the debt is unmanageable, you can consider selling assets as well.
Does QuickBooks use cash or accrual?
QuickBooks use only the accrual accounting method. Whether you have paid your bills or invoices or not, the app will by default calculate your expenses and income.
So, before you switch to QuickBooks, you need to consider if you want to follow the accrual method or not.
Why do farmers need accountants?
Farming is a vast endeavor, which involves a lot of financial calculations.
Farmers need to follow bookkeeping and other methods to keep track of all their financial data. Managing all on someone’s own can be difficult and there will be chances of mistakes.
For this reason, farmers need accountants, who are dedicated professionals capable of managing farming finance by keeping it updated.
What is a good debt-to-income ratio for a farm?
A good debt-to-income ratio in a farm would be 0.25 to 0.40.
So, based on that, if your debt-to-income ratio is or below 0.25, it’s extremely good. And if it’s above 0.40, you need to reconsider having a good financial plan for your farm.
If you’re opting for a USDA loan, you need to have at least 41% or less debt-to-income ratio.
What is the 5-year rule for farm losses?
According to the 5-year rule for farm losses, a farming activity will not be considered a hobby if the farmer is able to earn profit three out of five years or twice in seven years consecutively.
If someone fails to meet this criteria, the activity will still not be considered a hobby but the IRS risk will increase.
Conclusion
So, you have ample choices in accounting software for farmers.
All you need to check is the terms and conditions before switching to any.
Also, planning your farming budget and financial goal is constant regardless of whichever accounting method or app you choose.
Below is a Pinterest friendly photo…. so you can pin it to your Homestead Lifestyle Board!!
