Basic Accounting for Farmers
Disclosure
The numbers in this presentation are fictitious and used for illustrative purposes only.
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. Why Bother?
2. Goals for this Webinar
3. The Financial Statements
a) Income Statement
b) Cash Flow
c) Balance Sheet
4. Basic Concepts for Developing Bookkeeping Systems
5. Applications of Concepts
Why Bother Keeping Better Records?
Is your business profitable?
Navigate Cash Crisis
Can you afford to purchase new
equipment?
File taxes
Provide documentation to prospective
lenders and investors
Goals – Develop Building Blocks
Understand Basic Accounting
Develop Systems for Tracking your finances
Track and Measure your progress
Plan for growth and profit
Ensure Your Business is Financially Sustainable
Garbage In, Garbage out.
Income Statement:
Summarizes Operating Revenues and Expenses Revenue
Net Sales
COGS Seeds/Seedling
Produce for Resale
Operating Expenses Direct Operating
Labor
Occupancy
G&A
Repairs and Maintenance
Income Taxes
Operating Income = Revenue – Expenses
Other Income & Expense
Net Income = Operating Income + Other Income/Expenses
Cash Flow 101
Know when you’ll have cash and when you’ll need to save or borrow…
Cash Flow From Operations Inflow: Sales Revenue
Outflow: Operating Expenses
Cash Flow From Investments Inflow: Sale of Equipment, Land or Other Assets
Outflow: Purchase of Equipment, Land or other Assets
Cash Flow From Financing Inflow: Cash Received from Loan, Grants or Investors
Outflow: Repayment of Loan or Investors
Statement of Cash Flows
• Cash Flow from Operations
• Cash Flow from Investing
• Cash Flow from Financing
Net Income Cash Flow
The Balance Sheet
Assets Liabilities Owners’ Equity
What You Have
•Cash •Inventory •Equipment and Buildings •Breeding Stock
What You Owe What You Own
•Accounts Payable •Credit Cards •Bank Loans and Lines of Credit
•Net Income •Investors Equity •Owners Equity
Basic Concepts for Creating Systems
Cash Accounting
Record revenues and expenses when the cash is
received or spent.
No A/P or A/R
• Record revenues when earned, and expenses
when incurred.
• Match expenses with revenues when possible
Fixed vs. Variable Costs
Fixed Costs: Variable Costs:
A periodic charge that does not
vary with business volume.
Insurance
Rent
Bank Fees
An expense that varies with
production output and/or revenue.
Seeds and Seedlings
Animal Feed
Labor/Payroll
Operating Expenses vs. Capital Expense
Operating Capital
Short Lived Purchases
Inexpensive
Improvements
Examples
- Hand tools
- Fixing Fence
- Animal Feed
Long Lived Purchases
Life-extending
Improvements
Examples
- Greenhouses
- New Plastic
- Breeding Stock
Assigning Buckets
Purchasing Assets Operating Revenue
and Expenses
Cash Flow From
Financing
Assigning Buckets
Purchasing Assets Operating Revenue
and Expenses
Cash Flow From
Financing
Pricing, Budgeting and Forecasting
Now What?
Can you afford to make new purchases?
Are you charging the right price?
Are your expenses in line?
Does it make sense to enter a new market?
And of course,
File your taxes
Easily assemble numbers for loans and grants
Looking Back to Look Forward
“Performance data quoted represents past
performance; past performance does not guarantee
future results.”
But it’s your best predictor
Looking Back 2008 2009 2010
Revenue
Sale of Vegetables 193,780 191,509 214,563
AgreSource 5,818 1,190
Settlement 49
Vegetables 28,217 13,792 17,561
Total Revenue 227,815 205,350 233,314
Cost of Sales
Fruit, Vegetables and Gifts for Resale 19,188 22,989 26,657
Christmas Trees and Wreaths for Resale 12,367 11,166 12,179
Total Cost of Sales 31,555 34,155 38,836
Gross Profit 196,260 171,195 194,478
Accounting 165 165 165
Advertising 2,917 2,810 2,780
Association Dues 426 360 445
Car and Truck
Chemicals 7,154 8,078 7,854
Depreciation 5,324 8,275 7,571
Equipment 355
Fertilizer and Lime 16,627 5,695 17,056
Freight and Trucking 1,887 2,035 1,694
Gasoline 6,062 5,285 6,537
Insurance (excluding health) 3,104 2,924 2,239
Labor Hire 22,800 22,800 22,800
Rent or Lease: Other 2,720 1,785 1,785
Repairs and Maintenance 10,508 17,676 19,978
Seeds and Plants 32,790 37,012 36,251
Supplies 8,312 8,632 7,105
Taxes 4,848 4,911 5,126
Taxes: Payroll 1,744 1,744 1,744
Taxes: State Sales 4,197 4,867 5,645
Utilities 8,241 8,557 12,226
Veterinary, breeding and Medicine
Other Expense
Total Expense 139,826 143,611 159,356
Income Statement (Cash Basis)
Year Ending, Dec 31
Crop Profitability
Getting the Crop in the Ground (by acre)
Seeds
Seedlings
Fertilizer/Amendments
Stakes
Labor – planting/weeding
Getting the Crop to the Market (by case/pound)
Packaging
Labor – Harvest/Packing
Distribution
Tomatoes
Measurements:
Acreage Planted: 1 acre
Yield: 34 cases – 25 lb each per week
Harvesting Season: 8 week
Conversions:
1 acre = 272 cases = 6,800 pounds
Field Costs – Seasonal/by the acre
Labor Starting seeds ($20)
Watering ($20)
Transplanting ($60)
Staking ($40)
Weeding ($40)
Potting Soil/Trays $100
Seeds $60
Black Plastic/Amendments $50
Total Cost Per Acre: $390
Cost Per Case: $1.43
Field Costs – By the Case
Labor
Harvesting – 15 minutes per case
Sorting/Packaging – 10 minutes per case
$5/case
Supplies
Packaging - $.60/case
Total Cost = $5.60/case
Total Cost: Seed to Case = $7.03
Distribution Costs
Wholesale
Calls to Customers/Place Orders – 10 minutes
Packaging for Wholesale; loading truck – 10 minutes
Delivery Time – 40 minutes
Fuel - $5
Truck Expense -- ??
Total Cost Per Delivery $17 ++
Filling in the numbers
Sale Price $25.00
Gross Profit $17.97
Delivery $17.00
Profit $ .97
Sale Price $250.00
Gross Profit $179.70
Delivery $ 17.00
Profit $162.70
Thank you!
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