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The Management Calendar
Farm Business Management Update, February/March 2005
By Gordon Groover (email@example.com), Extension Economist, Farm Management, Agricultural and Applied Economics, Virginia Tech
Over the last two weeks I was fortunate to have the opportunity to talk with farmers, extension agents and specialists, and many others about profitable forage and fencing systems at five of the area Virginia Forage and Grassland Council Conferences. I'm always convinced I'm the one on the learning end of these speaking engagements. The questions and discussions help me formulate the practical questions for research and extension work. So I would hope that getting out to meetings and workshops to listen and ask questions of others farmers, service provides, and speakers will help you critique your farm business and formulate new plans and options to improve profitability. This concept is nothing new; some 2,400 years ago Socrates used questioning to help Athenians gain knowledge.
Remember the first day of spring is less than two months away and federal taxes for most farmers are due to the IRS by March 1. Listed below are the items that need to be included on the farm business managers' calendar for the first quarter of 2005.
- Tax management and basic federal income tax information - George F. Patrick in the Department of Agricultural Economics at Purdue University updates his extension publication titled "Income Tax Management for Farmers" annually. You can find the 2004 edition at http://www.agecon.purdue.edu/extension/pubs/taxplanning.asp.
- Now is the time to think about starting a new financial record keeping system. The Ohio and Oklahoma extension systems offer instructional guides on the internet to get you started with Quicken® an inexpensive record keeping software package. Ohio's instructional package is found at http://ohioline.osu.edu/b920/ and Oklahoma's can be found at http://agecon.okstate.edu/quicken/Using%20Quicken.htm.
- Get the farm's 2004 financial records closed out: Post all income and expenses paid during 2004 in your record book or accounting software. You still have time to conduct an end-of-the-year inventory of all the farm assets and liabilities to provide data for the farm's net worth statement.
- Using your 2004 records, develop an itemized list of income and expenses. The categories found on the IRS Schedule F can serve as a starting point for estimating net income for the farm business. Compare your results to previous years, looking for both weakness and strengths.
- Decide how much you'll contribute to an IRA for 2004 and set goals for 2005. If you do not use a certified financial planner (CFP), consider his/her usefulness in helping plan for retirement, college, insurance coverage, and other items. Visit the web site for the CFP organization to get information on services and standards required for planners. You can also search or a CFP in your area at http://www.cfp.net/
- Seek assistance from Virginia Cooperative Extension's farm business management agents, lenders, or your accountant to develop a detailed financial analysis of your farm business, including the major 16 financial ratios. These ratios and a detailed financial analysis can be generated by using the Center for Farm Financial Management program FINAN. FINAN and other computer programs can be purchased annually for approximately $100 or the whole analysis and planning package of three computer programs for $395. Details are at http://www.cffm.umn.edu/Software/FINPACK/
- Using last year's financial and production records, finalize your projected budgets, cash flow, and income statements for 2005. If you use Quicken® or QuickBooks® make use of the budget section to create a 2005 budget based on 2004 records. 2004 budget entries can all be modified to reflect anticipated changes in 2005, like higher fertilizer prices.
- Take your 2004 financial records and 2005 projected whole-farm budgets and cash flow statements to your lender to discuss line-of-credit needs and plans for 2005. Using the FINPACK programs or your Quicken® or QuickBooks®can help with this process.
- Grain and livestock producers should have their marketing strategies/plans in place for 2005 marketing year. Be sure to check with your local Farm Service Agency for changes in government programs and signup deadlines. Be sure to visit Purcell's Weekly Agricultural Commodity Market Report for market updates. The report is posted at http://www.ext.vt.edu/news/periodicals/purcell/.
- The end of February and March 15 are the cutoff dates for signing up for most crop insurance polices in Virginia (dates depend on insurance product and where you live). Detailed listings of all policy closing dates are listed at the following site: http://www.rma.usda.gov/data/sales-closing-dates/. Details on crop insurance are best discussed with a local agent. You can locate a local agent by visiting the following web site http://www3.rma.usda.gov/apps/agents/.
- Make sure your federal taxes are mailed by March 1 unless you pay estimated taxes, then the deadline is April 15. Virginia income tax returns must be postmarked by May 1.
- Prepare your crop and livestock record keeping system for a new year. If you are interested in a listing of agricultural related software packages go to: http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/econ4118?opendocument.
- Interested in value-added resources on the web? Take a look at the Ag Decision Maker web site at Iowa State http://www.extension.iastate.edu/agdm/vdmarketing.html. It has sections on Marketing Research, Direct Marketing, Promotion, and Brands.
- Looking for a general article on non-traditional land-based activities? Take a look at the article titled "Wildlife Recreation: Rural America's Newest Billion Dollar Industry." This article can be found on the Iowa State web site http://www.extension.iastate.edu/agdm/articles/others/HenJan05.htm.
Virginia Cooperative Extension