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The Management Calendar
Farm Business Management Update, February-March 2007
By Gordon Groover (firstname.lastname@example.org), Extension Economist, Farm Management, Agricultural and Applied Economics, Virginia Tech
I’ve been on the road around the state over the last two months at dairy workshops, farm visits, and Virginia Forage and Grassland Council Conferences. The issue that all farmers face is how best to control costs and position the business to take advantage of opportunities for higher profits. In a number of cases, the decision to change or reposition the farm business, resulting in higher profits, was made not strictly for profits. The choice to change was driven by a desire to be a better steward of land and resources, to develop a connection with outside world and the people who buy products, to create a family focus business, and so on. These choices were backed up by a sound business plan with attention to management, yet they never lost sight of the underlying goal or mission that drove the change. So pay attention to the bottom line, but do not lose sight of the passions that helps us succeed.
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 2007.
- Need to find out information of federal taxes? The Farmers Tax Guide IRS Publication 225 is online and can be found at: http://www.irs.gov/pub/irs-pdf/p225.pdf .
- A summary of changes information on tax management and basic federal income tax information is published annually by George F. Patrick in the Department of Agricultural Economics at Purdue University. Look for the publication titled “Income Tax Management for Farmers” at http://www.agecon.purdue.edu/extension/pubs/taxplanning.asp.
- Interested in finding a listing of all types of agricultural software? Then the best place to look is our neighbor to the north, Alberta Agriculture and Food. They have the most comprehensive listing of computer software designed for farm and agribusiness on the web http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/econ4118?opendocument.
- Get the farm’s 2006 financial records closed out: Post all income and expenses paid during 2006 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 2006 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 2006 and set goals for 2007. 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 2006. If you use Quicken® or QuickBooks® make use of the budget section to create a 2007 budget based on 2006 records. 2007 budget entries can all be modified to reflect anticipated changes in 2007, like higher feed cots.
- Take your 2006 financial records and 2007 projected whole-farm budgets and cash flow statements to your lender to discuss line-of-credit needs and plans for 2007. 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 2007 marketing year. Be sure to check with your local Farm Service Agency for changes in government programs and signup deadlines. Be sure to visit Weekly Roberts Agricultural Commodity Market Report for market updates. The report is posted at http://www.ext.vt.edu/news/periodicals/roberts/.
- 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). 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.
Virginia Cooperative Extension