The Management Calendar

By Gordon Groover Extension Economist, Department of Agricultural & Applied Economics, Virginia Tech

Farm business managers should consider putting the following activities on their management calendar for December and January.

  • Before the end of the year (calendar tax year filers), follow up on end-of-year tax management strategies recommended by your tax advisor.  Additional information can be found in IRS publication 225 Farmer’s Tax Guide at www.irs.gov/pub/irs-pdf/p225.pdf.  Hard copies of Farmer’s Tax Guide can be obtained from many of your public libraries. 
  • Begin closing out the farm books by collecting information for the farm net worth statement. Around the first of the year when you need to walk off all that holiday food, take a notepad or try out any or all of the new technology as you walk around the farm. Record the number and approximate value of all farm assets (cattle, tractors, machinery, buildings, inventories of grains and feedstuffs, chemicals, fuel, etc.) that can be organized on the asset side of the balance sheet. Be sure to place the notes or recording in a safe location (safety deposit box or fireproof box) for possible insurance claims, IRS audits, or background for financial statements. Review your end-of-year bank statements or contact your lender for current listings of all personal and business liabilities. You now have all the information you need to complete a market value net worth statement.
  • If you are using cash accounting methods for tax purposes (computerized business records or hand-kept), you need to make sure your actual records match the deposits and check dates for all claimed income and expenses. A quick check of the records will help address any problems that might arise at tax time.
  • Plan to get all tax records summarized and to your tax advisor by February 1, 2014. Also take a look at the listing of Virginia tax credits that may apply to your business this year at:  http://www.tax.virginia.gov/site.cfm?alias=TaxCredit.  Make sure your tax advisor is aware of these credits.  An abbreviated list of credits for agriculture and forestry are listed below.
    • Agricultural Best Management Practices Credit
    • Biodiesel Fuels Credit
    • Credit for Taxes Paid to Another State
    • Conservation Tillage Equipment Credit
    • Fertilizer & Pesticide Application Equipment Credit
    • Land Preservation Credit Provisions Prior to 2007
    • Land Preservation Credit Provisions for 2007 & After
    • Long-Term Care Insurance Credit
    • Riparian Waterway Buffer Credit
  • Use 2013 financial and production records to develop projected budgets, cash flow, and income statements for 2014.  If you are using Quicken or QuickBooks, use the automated feature to create a budget based on last year as a starting place to create a detailed budget to reflect your expected costs and returns for 2014.  If you are using the Virginia Cooperative Extension “Farm Record Book:  Expenses and Receipts,” the back pages provide forms to summarize all your financial data.
  • Depending on the type of farm, begin working on a marketing plan for 2014 by collecting information on prices and world market situations.
  • Keep up-to-date on the release of economic, crop conditions and estimates, world agricultural situation and outlook, and many other USDA reports by looking at the USDA report calendar at http://www.usda.gov/wps/portal/usda/usdahome?navid=AGENCY_REPORTS.
  • Check on crop insurance policies by visiting the Risk Management Agency website at http://www.rma.usda.gov/ to find an agent and view the multitude of policies (crops, livestock, forages, vegetables nursery, clams, and more) that are available in your area.
  • Close out and summarize livestock and/or crop records for 2013, noting problems that must be addressed when making cropping, feeding, and breeding decisions during 2014. Compare 2013 records to previous years looking for strengths and weaknesses.
  • Review 2013’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.  This is very important if you have expanded acreage, livestock numbers, and/or replaced an employee or changed the number of employees.
  • Plan to start the new year by scheduling regular meetings with all workers and family members to discuss work activities as you gear up for the spring push.  Make sure all workers feel free to suggest ways to improve efficiency.  Think about creating an employee handbook for important information on pesticide safety, farm bio-security, and safe operations of machinery and equipment.

Selective information that might be useful to farmers and their advisors:

  • The Virginia’s Use Value Assessment Program (http://usevalue.agecon.vt.edu/) web site has been updated for Tax Year 2014 (TY) see the following items:
    • TY2014 Rental Rate Approach estimates for Agricultural and Horticultural lands are at: http://usevalue.agecon.vt.edu/Agri_Hort_estimates.htm
    • TY2014 Income Approach estimates for Agricultural and Horticultural (with brochures), Forest, and Open Space are at: http://usevalue.agecon.vt.edu/estimates.htm.
    • Frequently Asked Questions (FAQs) about the Use Value Assessment Program are at http://usevalue.agecon.vt.edu/FAQ.htm and to view or print all of the Frequently Asked Questions, a PDF file can be found at: http://usevalue.agecon.vt.edu/myweb3/Publications/FAQs%20Pub%20%28Nov%202012%29.pdf.
    • Time to order your Virginia Cooperative Extension “Farm Record Book: Expenses and Receipts” (Publication 446-017).  This 120-page record book provides an organized way of keeping track of annual financial, labor and personnel, and production-related records.  It provides forms for many categories of expenses, receipts, labor, and financial summaries to meet the needs of most agriculturally-related businesses using cash accounting methods.  Column headings are included for major items with some columns remaining blank for your own headings.  Forms are arranged to facilitate transferring totals to income tax forms (Schedule F, tax deprecation, and Form 4797) and to help complete end-of-the-year analysis.  Virginia Cooperative Extension “Farm Record Book: Expenses and Receipts” is available from Virginia Cooperative Extension for $12.00.  Call your local extension office and request the order form VCE Publication 446-016, print the form at www.ext.vt.edu/pubs/agecon/446-016/446-016.pdf, or contact me at (540) 231-5850.
    • Need help understanding and using financial statements?  The Center for Farm Financial Management has created a new online workshop series to help agricultural producers and/or anyone who works with them to understand and use common financial statements and measures.  The website, Interpreting Financial Statements and Measures (IFSaM), is intended to teach producers the basics of interpreting the four major financial statements and the 21 financial measures recommended by the Farm Financial Standards Council.  IFSaM is a series of online videos that producers can work through at their own pace.  Each session provides benchmarks, based on actual farms, that producers can use to evaluate their own financial position and their financial performance.  Case farm examples are used to bring the data to life.  There are also optional “test your knowledge” quizzes at the end of each session.  In total, there is over 2 ½ hours of information.  Best of all, it’s free.  This series was created with funding from the North Central Risk Management Education Center.  IFSaM is located at http://ifsam.cffm.umn.edu/.
    •  A must read for all of us involved in agriculture is the current issue of “Choices,” published by the Agricultural and Applied Economics Association and can be found at www.choicesmagazine.org/.  There are 2 main themes in the third quarter (October 2013) edition:
  1. “Attitudes Toward Risk in a Changing Agricultural Marketing Environment” articles are as follows:
  • Theme Overview: Attitudes Toward Risk in a Changing Agricultural Marketing Environment. Mark Welch and David Lamie
  • How Well Do Farmers Tolerate Risk? Comparisons with Nonfarm Business Owners and the General Population. Brian E. Roe
  • Have Concerns over Futures Market Integrity Impacted Producer Price Risk Management Practices? Mark Welch, David Anderson, John Robinson, Mark Waller, Stan Bevers, Rob Hogan, Steve Amosson, Dean McCorkle, Jackie Smith, and Emmy Williams
  • Does E-Commerce Help Agricultural Markets? The Case of MarketMaker. Carlos E. Carpio, Olga Isengildina-Massa, R. David Lamie, and Samuel D. Zapata
  • Food Product Liability Insurance: Implications for the Marketing of Specialty Crops.     Kathryn A. Boys.
  1. “Innovations in Nonpoint Source Pollution Policy”
  • Theme Overview: Innovations in Nonpoint Source Pollution Policy. John B. Braden and Kevin J. Boyle
  • Addressing Death by a Thousand Cuts: Legal and Policy Innovations to Address Nonpoint Source Runoff. Lara B. Fowler, Matthew B. Royer, and Jamison E. Colburn
  • State Level Efforts to Regulate Agricultural Sources of Water Quality Impairment.    Catherine L. Kling
  • Local Innovations in Water Protection: Experiments with Economic Incentives.     Lisa A. Wainger and James S. Shortle
  • Integrated Modeling for Conservation Policy Support. Silvia Secchi
  • A Tale of Many Cities: Using Low-Impact Development to Reduce Urban Water Pollution. Amy W. Ando and Noelwah R. Netusil
  • U.S. Coastal and Estuarine Stormwater Management Approaches. Sara Aminzadeh, Linwood Pendleton, Sean Bothwell, Amy Pickle, and Alexandria B. Boehm
  • Innovations in Nonpoint Source Pollution Policy-European Perspectives. Jussi Lankoski and Markku Ollikainen
  • Additional reading from the University of Kentucky’s Ag Economics Department  Newsletter are listed below and can be viewed at http://www.ca.uky.edu/agecon/index.php?p=209
    • 2013 Tax Review – Suzy Martin
    • The “Own/Rent Decision for Beginning Farmers – Lee Meyer
    • Disciplining Employees: The Hot Stove Rule – Steve Isaacs
    • Update from the Community and Economic Development Initiative of Kentucky—Alison Davis and Sara Bowker
    • Policy Briefs: Farm Bill and Tobacco Buyout Payments – Will Snell
    • Ag Decision Maker at Iowa State has very useful information for all managers and can be found at http://www.extension.iastate.edu/agdm/.

 

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