You may think your basic accounting software is doing a fine job in helping you manage your farm’s finances. What you may not know is that accounting that is more specific to how a farm works can offer more features and benefits to you and your operation. Here are some of the ways farm accounting software programs can help you increase your profits.
Tools in a more age-specific program can help you create “what-if” scenarios that can help you decide whether to make a big purchase or not. Being able to see how a purchase impacts your operation can help you make smarter purchasing decisions, which can in turn increase your farm’s profitability.
A general accounting system will not offer such detailed features as tools that help you track specific information about crops and livestock. When you are able to track detailed crop and livestock information on a cost per unit basis, you can see where to make improvements over time.
While many basic programs do not offer inventory tracking, farm accounting programs can offer tracking of inventory in multiple quantities, so farmers can keep track of items no matter how they are purchased, produced, or stored.
Some ag-specific programs offer tools that allow farmers to compare themselves against benchmarks. Ratio analysis can do this as well as calculating ratios and showing trends, so they can address issues and increase profitability.
You know that some of the things you purchase as a farmer are actually going to be used for several of your production units, not just one. That’s why it is crucial to distribute your transactions across multiple accounts and production units. By using an ag-specific program, you can distribute the transactions more precisely to where they belong, giving you an accurate financial picture.
Multiple Tax Entities.
Many farms have multiple tax entities. It can be extremely helpful to your operation to keep these entities separate, yet still retain the ability to do a combined business analysis when needed. An accounting system that is geared toward agriculture can offer you this capability, where a more basic system likely will not.
It can be tempting to purchase the most basic and cheap accounting system from the shelves of the local office supply store. Many think it will be easier to use, and it must be good since so many people are using it. And while basic systems do serve the masses well, they are missing the most crucial aspects of financial management for a farmer. Farm accounting software programs can provide the tools needed specifically by farmers to understand their financial information and steadily increase profitability.