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The Management Calendar
Farm Business Management Update, February 2002
By Gordon Groover
From before recorded time, seasons have driven activities on farms. As the sun starts its northward march, we know it is getting close to planting time, and the sun's retreat signals harvest. Management of the farm business does not rely on the seasonal advance and retreat of the sun across the equator. Business managers must rely on manmade inventions like calendars to tell them the correct times for the all important management activities. Listed below are the items that need to be included on the farm business manager's calendar for the first quarter of 2002.
- Close out the farm's financial records: Post all income and expenses paid during 2001 in your record book or accounting software.
- Have all records to your tax advisor by early February, and check with your Virginia Cooperative Extension's farm business management agent on farm-related changes in state and federal taxes. A listing of Virginia tax credits can be found at the following site: http://www.tax.state.va.us/it_credit.htm. Make sure that your tax advisor is aware of these changes.
- Develop a net worth statement (balance sheet) with all assets and liabilities valued at the end of 2001. A call to your lender can give you the outstanding balance on all debts. Take a tour of the farm with a notepad or camcorder and inventory all assets and estimate the value or describe the asset so that you can lookup or ask someone for an estimate. Try to make this tour an annual New Year's Day farm walk/tour. Not only will it help you develop a net worth statement, it can be used for insurance claims in the event of an insurable loss.
- Using 2001 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.
- 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. Send me, Gordon Groover, an e-mail message if you want me to send you the recommended 16 financial ratios (firstname.lastname@example.org).
- Dairy farmers with good financial records please take note: You can enter your farm's production and financial records and compare your farm to the U.S. Top Dairies Financial Benchmarks. The WWW address is http://www.cpdmp.cornell.edu/Data.4D$TDWelcome. Once reaching the "Benchmarks" page, click on "I wish to become a registered user and submit my information." This link will take you to the data entry area. There are currently 1,377 dairy farms in the database.
- Using last year's financial and production records, develop projected budgets, cash flow, and income statements for 2002.
- Depending on the type of farm, begin working on a marketing plan for 2002 by collecting information on prices and world market situations. Be sure to check with your local Farm Service Agency for changes in government programs and signup deadlines. Check in with your crop insurance agent for changes in crop insurance coverage and signup deadlines for your county.
- Closeout and summarize livestock and/or crop records for 2001 noting problems that must be addressed when making cropping, feeding, and breeding decisions during 2002. Compare 2001 records to previous years looking for strengths and weakness.
- Take 2001 financial records, projected whole-farm budgets, and cash flow statements to your banker to discuss line-of-credit needs.
- Make sure your federal taxes are mailed by March 1, unless you pay estimated taxes; then the deadline is April 15.
- Review 2001's crop, hay, and livestock records for labor problems, bottlenecks, and down times. Include all employees in spotting and planning to correct labor bottlenecks. Draw up a labor flow chart listing estimated times and identify employees who will be responsible for major tasks.
- Schedule regular meeting with all workers and family members to discuss work activates as the farm gears up for the spring push. Make sure all workers feel free to suggest ways to improve efficiency.
In February and March we all spend more time inside, so try to make the best of the time by the woodstove and get caught up on the paperwork and the planning for next year.
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Virginia Cooperative Extension