With the fourth quarter of 2021 already in progress, now is a great time to perform an overall financial check-up for your business.
“We recommend that farm operations do this annually,” says partner Brad Palen of KCoe Isom. “Not only does it provide you with a clearer picture of your business’ progress for the year, but it can also potentially find some late-season opportunities to save or make money. You might even spot ways to minimize your tax obligations.”
There’s a 15-point checklist to track the progress of your business as 2021 winds down.
“As a CPA, I hope you address every one of them. But even completing only one or two will provide a clearer picture for the year. More importantly, you might detect issues that can prevent small problems from escalating into big ones,” Palen adds.
- Know your numbers. Make sure your accounting records are in line. Confirm that your loans agree with your bank balances. Do your year-to-date revenues and expenses line up with your budget? What changed and why?
- Gather all documents for the fixed-asset purchases you’ve made this year. Send them to your accountant to update your depreciation schedule.
- Reconcile all your bank accounts. Know what your balances are on operating or vendor loans. Is there enough to pay expenses for the rest of the year?
- Review your grain-sales contracts. See if you can defer any payments to next year.
- Identify what kind of crop insurance you have. Check whether there’s opportunity to defer any proceeds.
- Assess your inventory and review all costs associated with it. Be aware that feed costs are tax-deductible.
- Examine your crop results. Did yields meet your expectations? It’s a good time to communicate with your agronomist about what worked and what didn’t.
- Plan out machinery and equipment repairs so they’re completed before planting rolls around next spring.
- Review any rental or lease agreements. There may be opportunity for positive gains. If you have a landlord or crop-share arrangement, make sure you have the information you need to split expenses or to pay your share of revenues.
- Speak with your accountant about any opportunities to better align existing debt structure and enhance working capital.
- Go over your employee benefits package, including any potential bonuses and 401(k) contributions. This will be especially helpful in preparing you for employee performance reviews.
- Set up a 2022 strategic planning meeting with your board of directors and trusted advisors. Once you’ve developed a plan, relay it to your key managers to help you execute it.
- Re-evaluate your risk management plan for 2021. Will it stay the same or change for the coming year?
- Begin developing a full farm budget for 2022. Provide details for each crop. Include all expenses. Don’t leave out an expense just because you think it’s a personal item. Including those costs will ensure a way can be found to pay for them.
- Communicate your plans and budgets to your tax advisor. The more he or she knows, the better they can help you with tax-planning advice.
These steps can help you decide how to proceed for 2022 and leaving them until the last minute can result in a few frustrating, crunched days of catching up, or even some missed planning opportunities.
With roots dating back to 1932, K·Coe Isom is a top 100 accounting firm and the nation’s leading food and agriculture consulting firm. Its specialists deliver increased value and growth for producers – from policy to plate – with comprehensive strategies and advisory in the areas of financial management, sustainability, farm programs, renewable energy and land conservation, and legacy planning. www.kcoe.com