Basic Accounting for Farmers

Disclosures & Disclaimers The numbers in this presentation are fictitious and used for illustrative purposes only. Financials and Numbers are consolidated for presentation purposes. As you plan and project for your own business, you will need to research and calculate the financial data based on your specific economic reality.

Agenda 1. Introductions and Goals for this Webinar 2. Income Statement 3. Balance Sheet 4. Cash Planning 5. Budgeting

Develop Building Blocks Understand Basic Accounting Develop Systems for Tracking your finances Track and Measure your progress Plan for growth and profit Accounting For Farmers Part I QuickBooks Webinars We are here! End Game!

Today’s Goals  Evaluate the health of your business by reviewing the Income Statement  Use the Balance Sheet to Understand Cash Flow  Develop tools to manage Cash Flow

Income Statement When to use: UUnderstand the profitability of your business, as well as the nuances of your different products lines and revenue streams. PProject the profitability of a new venture. FFile your taxes. Key Details: BBusiness activity over a period of time AActivities directly related to the operation of your business, as well as indirect activities TTotal revenue, total expenses and net profit.

“Troubleshooting” Profitability

 Revenue  Is it going up or down?  COGS  Are you marking up resale items enough?  Operating Expenses  What are the major expenses?  Operating Profit  Is it positive?  Other Income & Expenses  Are they driving losses?

The Schedule F- Income Statement

Challenge #1  Grants are included in Revenue

Challenge #2  Expenses aligned to Schedule F, not business reality Direct Cost of Animals Liability? Vehicle? Employees? Payroll Tax? Property Tax? Income Tax?

Income Statement: Organize to Extract Meaning  Revenue  Net Sales  COGS  Produce & Products for Resale  Gross Profit = Revenue - COGS  Operating Expenses  Direct Operating  Labor  Occupancy  General and Administrative (G&A)  Repairs and Maintenance  Operating Income = Gross Profit – Expenses  Other Income & Expense  Grants  Depreciation  Interest Expenses  Net Income = Operating Income + Other Income & Expenses

Income Statement - Example

Common-Size Numbers

Is Revenue Going Up Or Down? Growth Rate = (new-old)/old

COGS: Are you marking up resale items enough?

Review Expenses  [[Click to Excel Spreadsheet]]

Questions?

The Balance Sheet  When to use:  Provide to potential lenders  To help in cash planning  To understand the changes of your business  Key Features:  A snapshot in time, usually at the end of the fiscal year or month that details what the business has (assets) and how it got them.  It shows who has claims to your assets – whether it is you/your business or someone else.

The Balance Sheet AssetsLiabilitiesOwners’ Equity What You Have Cash Inventory Equipment and Buildings Breeding Stock What You OweWhat You Own Accounts Payable Credit Cards Bank Loans and Lines of Credit Net Income Investors Equity Owners Equity

Balance Sheet – Example #1

Where’d the Money Go?  Your business is profitable, but cash is tight.

Balance Sheet – Example #2

Questions?

Managing Cash Flow  Create a budget  Track Cash Flow  Compare Budget to Actuals  Make Adjustments

Creating a Budget (Projections)  Review Previous Year  Consider Changes for coming year  Outline  Revenue  Expenses  Capital Purchases  Financing  Check Cash Flow  Adjust as Necessary

Cash Flow Budget

Weekly Cash Planning – Example #1 ItemAmountWhere to find the numbers Beginning Cash Balance$4,075Check Register (QB) or Balance Sheet Bills due this week- 1,386Balance Sheet (A/P) or QB Other payments expected- 1,500Projections Cash Expected this week+ 1,500Projections Payments from Customers Expected + 1,000Balance Sheet (A/R) or QB Cash to set aside-1,000Budget Cash Available$2,689

Weekly Cash Planning – Example #2 ItemAmountWhere to find the numbers Beginning Cash Balance$4,075Check Register (QB) or Balance Sheet Bills due this week- 2,386Balance Sheet (A/P) or QB Other payments expected- 4,500Projections Cash Expected this week+ 1,500Projections Payments from Customers Expected + 1,000Balance Sheet (A/R) or QB Cash to set aside- 1,000 Cash Available- $1,311

Questions?

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Depreciation & Accumulated Depreciation Example: You Buy a tractor for $5,000 on January 1. You anticipate it has 5 year life, and at the end of year 5, it has no value ANNUAL DEPRECIATION EXPENSE YEAR 1YEAR 2YEAR 3YEAR 4YEAR 5 $2,000 Accumulated Depreciation after 2 years $3,000 Accumulated Depreciation after 3 years $4,000 Accumulated Depreciation after 4 years $1,000