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Fort Valley State University
Small Farmer Outreach Training
and Technical Assistance Project

THE IMPORTANCE OF GOOD RECORD KEEPING

Present day farming operations are becoming more and more business oriented than yesterday’s farming operations. Being a good producer is no longer good enough to remain in business. The key to becoming a successful farmer in today’s era is being a good producer as well as a good financial manager.
The first step in being a good financial manager is keeping good, accurate records and establishing a sound record keeping system. Too often, there is a misconception that a person needs records so that he or she can report their taxes. However, record keeping plays a much larger role in business. Farming is a business and records can be helpful in planning improvements for that business.
Record keeping information provides the basis for the preparation of financial statements used in analysis and monitoring the progress of the business. A record keeping system should be: (1) easy to keep, (2) provide the necessary information, and (3) provide the information when needed.

TYPES OF RECORD KEEPING SYSTEMS

There are different types of record keeping systems a person can use in his or her operation. Four of the most commonly used systems are: Shoe Box Method, Hand-Kept Record Ledger, Computerized System, and Record Associations.
Shoe Box Method
All receipts, checks, invoices and bank statements are collected and stored in a shoe box
Hand-Kept Ledger
Farm records are documented by hand into a record book
Computerized System
Analysts provide assistance in preparing and analyzing farm records
Records Association
Analysts provide assistance in preparing and analyzing farm records

USE OF RECORD KEEPING

Records can be used to determine and/or develop the following things:

How much money was taken in
How much it cost to operate the farm
How much it costs the family to live
What crops were planted and how much was produced
The profitability of each enterprise
Records can also be used to develop sound marketing plans, loan applications and reports to lenders.

RESULTS OF GOOD RECORD KEEPING

Improved decision-making skills
Ability to evaluate the farm financial performance position
Ability to identify production and marketing problems
Ability to decrease debt/asset ratio
Improvement in farm management practices
When choosing the right record keeping system to incorporate into your farm, remember decisions made on the farm can be no better than the information used to make them. A good record keeping system is one that will provide the necessary information and provide the information when needed. It will furnish the necessary information for understanding the activities of your farming operation.

Reference: Castle, E.N.; M.H. Becker, and A.G. Nelson, Farm Business Management: The Decision-Making Process, Third Edition.

For more information, contact:

Co-Directors:
Glenwood F. Hill, Ph.D.
Mark Latimore, Jr., Ph.D.
Project Coordinator: Marc A. Thomas
Small Farmer Outreach Training
and Technical Assistance Project
Fort Valley State University
Cooperative Extension Program
P.O. Box 4061 Fort Valley, GA 31030-4313
(478) 825-6269

 
 


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