The Organic Farmer's Business Handbook: A Complete Guide to Managing Finances, Crops, and Staff - and Making a Profit by Richard Wiswall

Author:Richard Wiswall [Wiswall, Richard]
Language: eng
Format: epub, pdf
Publisher: Chelsea Green Publishing
Published: 2009-10-09T00:00:00+00:00

Paid bills in chronological order.

A few variations on this simple paid bills/ unpaid bills setup warrant discussion. Some are commonplace, like using personal checks or cash to pay for farm expenses. Others will increase office efficiency, such as paying by credit card or setting up monthly statements.

Using Cash

If I’m delivering produce in town and running on empty, but I forgot my checkbook, I may pay cash for some fuel to get home. Because the delivery fuel is a bona fide farm cost, I want to make sure I expense it through the farm account to take advantage of the substantial tax benefit. Chapter 8 explores this topic in detail, but, in short, if I fail to record a farm expense, I personally lose one-third of the purchase price.

Say what? If I spend $45 on delivery fuel and forget to record it as a farm cost for tax purposes, I don’t get to offset my farm income with that $45. My year-end profit would be $45 higher, and I’m going to have to pay taxes on that extra $45. Taxes for the self-employed cut a full third out of year-end profit (usually 15 percent federal income tax, 15.3 percent Social Security and Medicare, and roughly 4 percent state income tax). So that’s an extra $15 I would have to pay in taxes just because I didn’t record my $45 in fuel as a farm expense. Every farm expense should be used to offset your farm income and profit to save overpaying taxes.

This example shows that I’m actually $15 poorer by not recording the $45 of fuel (paid by cash, or any other means) as a farm expense. Fifteen dollars may not seem like a lot, but over the course of a year, all missed expenses add up—and come right out of your wallet.

The lesson: Record all your farm expenses, cash or not.

What do I do when I pay cash for a farm item? I write on the slip “paid cash” and put it into the unpaid bills area in my office. I pay that bill from farm funds as I would any other unpaid bill, the only difference being that I make the farm check out to myself—reimbursing my personal funds. I mark on the bill “reimbursement for ____, paid check # ___,” add the date, and circle the dollar amount.

Set Up Accounts Billed Monthly

Another variation on the basic paid bills/ unpaid bills setup is one that increases efficiency and reduces errors: setting up expense accounts with monthly statements for all the businesses you routinely purchase from. Hardware stores, auto parts outlets, feed suppliers, seed companies, and gas stations are all likely candidates. Instead of writing a check every time you purchase gasoline, or some nuts and bolts, or a packet of seed, let the business you buy from keep a tab going for you, and then pay by monthly statement. You’ll never write more than twelve checks per year for each business, and you’ll be writing them at the calm of your office desk—not rushing off to finish deliveries or bolt up your irrigation pump.

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