Make time for a December check-up
Holiday festivities and year-end pressures make this a busy time of year for most businesses. Even so, there’s still enough time left in December to perform a financial check-up for your farm, ranch or agriculture operation.
Checking off even a few items from the list below will not only shed light on your progress for 2021 but potentially uncover some opportunities to save or make money yet this year. A December check-up can also help predict what 2022 might hold for you. It can signal areas where you can improve and what changes you might need to make. Plus, you’ll be better prepared when tax time rolls around.
1. Add up the numbers. Reconcile your loan and checking-account balances to make sure they agree with the bank. Do your year-to-date revenues and expenses line up with your budget? Provide your accountant with your 2021 purchases of equipment, breeding stock and land. This will allow him or her to update your depreciation schedule. Prepare a list of your deferred grain contracts. Assess your on-hand inventory and the costs associated with it. Inventory will include livestock, seed, fertilizer, chemical, fuel and any grain not yet sold. It won’t include equipment, which is considered a fixed asset. Also, be aware that feed costs are tax-deductible.
2. Know where you stand with operating or vendor loans. Make sure you can pay expenses for the rest of the year.
3. Review your operations. Compare the financial results from adding up your numbers and accounts. What worked and what didn’t? What’s different and why? Examine your crop yields. Review lease agreements to see if they’re at market levels. Go over your loan agreements. Re-evaluate your risk management plan for 2022 and whether it should change from this year. Take a good look at expenses over the past year and see where you can cut back. You might discover that you’re spending too much on certain products and services.
4. Back-up your essential computer data. That includes customer and vendor contacts. Download important reports or data files so you can continue to do business if a disaster should strike. It’s also a good idea to reorganize your paper and electronic files so you have back-ups that are readily accessible.
5. Plan for next year. Hold a strategic meeting to discuss budgets and crop plans for 2022. What equipment repairs or purchases will be needed before spring planting? Any tax changes that will affect your ag business? Include a high-level or trusted staff member to go over needs and numbers. Once you’ve outlined your strategy, meet with your key managers to discuss how to implement your 2022 plans.
6. Communicate your plans and budgets to your accountant or tax advisor. The more he or she knows, they better they help with tax-planning advice.
7. Remember your employees. Look over your employee benefits package, including any potential bonuses and 401(k) contributions. This will help you prepare for employee performance reviews. Further, cash bonuses, gift cards and holiday luncheons can go a long way toward rewarding, motivating and retaining the people who help you stay in business.
Enlisting the aid of your staff can make completing this end-of-the-year checklist easier and quicker. Once it’s done, you can enjoy the holidays and head confidently into the new year knowing that you’re on top of the details that will keep your business running smoothly in 2022.
Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Max applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].
