Released April 10, 2009
PINE BLUFF, Ark. – Just as good records serve as an important management tool for businesses, they do the same for farmers, says Arlanda Jacobs, Extension associate with the Small Farm Program at the University of Arkansas at Pine Bluff.
Good records provide an accurate reflection of financial performance and are the basis for sound planning for the future. Failure to keep records can prove costly, says Jacobs.
Failure to record a $20 business expense could cost you nearly $100 an hour, says Jacobs. The oversight raises net business income by $20. Overstating net income by $20 has a ripple effect.
(1) Social Security tax goes up by $3.06. ($20 x 15.3 percent for self-employed person)
(2) Federal income tax goes up $4 (assuming you are in the 20 percent federal tax bracket)
(3) State income tax goes up $1 (assuming you are in the 5 percent state bracket)
The $20 unrecorded business expense will cost you $8.06 more in Social Security, federal and state taxes. If you had recorded this expense in five minutes or one-twelfth of an hour, your savings would equal $96.72 per hour ($8.06 x 12).
Good records tell you how much income your farm is generating and what to expect in the future, how much cash is tied up in accounts receivable and for how long, what you owe, your expenses, and which crops are profitable, breaking even or are financial drains on the operation, says Jacobs. Also, records show your gross and net profits.
Large companies have internal accounting personnel and sophisticated record keeping systems to guide management. On the other hand, farmers, especially small ones, must rely on their own record-keeping skills.
Farmers can get help with record keeping from UAPB Extension associates. They also have a limited supply of the latest edition of the Farm Business Record Book, an 80-page record keeping book, with forms, from the United States Department of Agriculture Farm Service Agency.
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http://www.uaex.edu/news/april2009/0410uapb.htm
Contact: Carol Sanders, (870) 575-7238, sanders_c@uapb.edu
