A farmer from our Building a Sustainable Business course was wondering about using QuickBooks for keeping financial records. I responded, and thought it would be a good topic for this blog, so- here goes.
Yes, QuickBooks could be a good tool to use for farm financial records. It is one of standards out there today. QuickBooks appears to be the market leader for small business accounting, and it can work for farms. There are other programs out there, too.
With any record keeping system, we need to be able to track income and expenses, capital purchases and sales, and loans- both payments and newly borrowed money. We may also have to track payroll, and we may want to track family living expenses. The list of incomes and expenses is called the ‘Chart of Accounts.’ Getting that lined up properly is The Most Important Thing. Richard Wiswall, in his book
The Organic Farmer’s Business Handbook, http://www.catefarm.com/richardsBook.html, suggests that the Chart of Accounts follow the IRS farm tax form, Schedule 1040 F’s expenses, http://www.irs.gov/pub/irs-pdf/f1040sf.pdf I think this is a good idea- it makes things simpler.
Those expenses are in alphabetical order: car + truck, chemicals, conservation expenses, depreciation, employee benefit programs, feed, fertilizer + lime, freight + trucking, gas fuel + oil, insurance, interest, labor hired, pension plans, rent or lease, repairs + maintenance, seeds + plants, storage, supplies, taxes, utilities, vet breeding + medicine, and other. With a computerized system, you can set these up as your chart of accounts, and have subcategories of these to catch all of your expenses. Print out the list and stick it to the wall by your computer so you can find the right category as you are recording expenses.
Any record keeping system has to do two things. Record and Report. Ledger books, like the New England Farm Account books have lines for each transaction, and columns (the chart of accounts) where each amount is listed. This makes recording easy, but reporting is more of a chore. Each column must be added, then the totals moved onto another page. Turning this into a spreadsheet would make the recording easier, but making meaningful reports is still a challenge. The yellow book farm account book coveris set up for dairy, has printed column headings (that are easily whited-out) and is available from most UVM Extension offices for $10. Blue Farm Account Book coverThe blue book has no column headings, with suggestions for column headings for a number of farm products, I got a copy from Melissa.firstname.lastname@example.org.
Quicken is the ‘el-cheapo’ computerized accounting program. It is sold by Intuit, the same company that sells QuickBooks. Quicken is designed for family recordkeeping. Quicken is a cash record keeping system- a transaction occurs when cash goes across the barrel-head. Quicken is not smart enough to understand an invoice for a product that you sold but have not received payment for. In order for Quicken to work for farm accounting, you need to work on the Chart of Accounts. Both Ohio State Extension, and Oklahoma State Extension have excellent materials on how to use Quicken for farm accounting. Ohio State has bulletins that are free pdf files. We used these bulletins in courses here in Vermont a few years ago. http://ohioline.osu.edu/b931/index.html
Oklahoma State has lots of Quicken information, including instructional videos line. Their main website is http://agecon.okstate.edu/quicken/
UVM Extension earlier this winter ran some one-day seminars on using QuickBooks on farms. There is a book, The QuickBooks Farm Accounting Cookbook, available on-line from http://www.goflagship.com/products/cbkhome.htm It will help you with QuickBooks on your farm, but it is not a beginners manual.
The Vermont Small Business Development Center, http://www.vtsbdc.org/location, has occasional QuickBooks courses. You can contact your local center to find out if any are scheduled. Sometimes local high schools and Community Colleges offer QuickBooks courses in the evenings.
Some tax practitioners will come to their client’s business to set up QuickBooks properly. I know of some farms that email their data file to their tax person at the end of the year. Ask your tax person, or look around in your town for someone who does taxes, and ask if they can provide this service. QuickBooks has certified instructors listed here, http://proadvisor.intuit.com/fap/find_a_proadvisor.jsp?zipCode=
Yankee Farm Credit is a farmer-owned financial cooperative that lends money and provides financial services. One service that they provide, for a fee, is setting up QuickBooks. Their offices are listed here, https://www.yankeeaca.com select ‘contact us’ in the upper right.
No matter what recording keeping system you have, you must invest time into it to keep it up to date. If you just cannot make the time to do it yourself, some of the people listed above will do your book keeping for you.
Remember that Recording is the task. Reporting is using the records to understand what is happening and to actively manage your farm.