Keeping farm records is a key component of managing your small farm. Farm records serve a number of purposes on the small farm – even if it’s a hobby farm or homestead. Here are some of the reasons to keep farm records:
- Monitoring progress. If you are serious about running your farm, you will want to make sure that you are making progress toward your goals and that you are moving forward on your business plan.
Even if you’re a hobby farmer or homesteader, keeping track can make sure you meet your goals, and can help you be more efficient in your work on the farm. Farming is more satisfying when you are making positive progress versus spinning your wheels. Good farm records help you see what works, what doesn’t, and help you figure out why so you can make changes moving forward.
- Managing the farm. Although this is similar to monitoring progress, here I’m referring to keeping track of things like how many animals you have, what their health is, what health issues you may have had with them, what you’re feeding them and how much/how often, what vegetable varieties you have and how they perform. If you keep a detailed farm record about the specifics of your farm operation – the animals and crops, not just the finances – you’re getting a full picture of how your farm is functioning.
Sometimes you may be succeeding at generating positive income on your farm, but you’re struggling with an aspect of animal care that requires adjustment. Or, you may find that your profits are suffering, and the root cause is that you are simply charging too little. You won’t be able to trace that root because unless you record how much feed you’re buying and how many chickens that translates into, for example. You need both sides of the equation to run your farm effectively.
- Obtaining loans and grants. Many grants and loans for small farmers require that you have financial records to show what you have earned, what your expenses are, and so forth. Certainly if you’d like to borrow money from a bank or other financial institution, they may require financial statements to prove that the farm is financially viable.
- Taxes. Income tax returns will need to be filed for your small farm. You will want to keep detailed track of expenses and income for tax returns, to ensure that you are paying the proper taxes for your farm. Consult an accountant for details specific to your situation, but tracking income and expenses is a must for any farm.
What Records Should You Keep?
This is where it gets tricky and very individual. It’s hard to make blanket recommendations about what you need to track on a small-scale sustainable farm, hobby farm, or homestead. It really depends on what your goals are. So start with your business plan and work from there. What do you need to track to find out whether you’re meeting your stated objectives? How will you know if marketing is succeeding?
Financially, all farms should track income and expenses. Consult a tax professional for specifics here, but you’ll want to categorize expenses to match your income tax return categories and you will want to make sure you’ve captured every penny spent and earned.
Tips for Keeping Good Farm Records
- Use farm records to track progress toward goals. Setting farm goals is a very important part of running a small farm business. A business plan should also include these goals. When your record-keeping focuses on the goals you’ve already identified for your farm, you know that you’re tracking the right things. Sounds simple, but in reality it makes a huge difference and people don’t always take the time to yoke these two things together.
- Track both income and expenses. Sometimes it’s all too easy to get hyper-focused on either income or expenses and let the other languish. Track what goes in and what goes out religiously and you will reap benefits in terms of your farm business. Use whatever method works for you, but keeping farm expenses and income in a separate account from the household will help when it comes to tax time.
- Monitor your labor time. Most farmers ignore their potentially biggest resource: their own labor. Track the hours you spend doing various tasks on the farm, and if you have employees or other workers, track their time as well. This can be really eye-opening when you take the time to collect and then analyze it. If you wonder why the income/expenses are balancing but you don’t feel like you’re getting anywhere, take a look at how much labor you have to put in to each product and where it comes from.
- Keep up with records. Obvious, but the key is to build habits that you can continue over time. For some people, this will mean keeping up every day. For others, every week. Still others, monthly or quarterly will work. If you have a way to track things even during the busiest season, you can catch up on data entry when things slow down.
- Review periodically. Data doesn’t do any good if you don’t look at it, so take the time monthly or quarterly to evaluate your farm record-keeping, looking back to see what works and what doesn’t.