A producer's spooky season follows Halloween
AMES, Iowa — Halloween is behind us, but for many in production agriculture, catching up on end of year business transactions and attempting to do some enterprise analysis is the real spooky season. Whether it’s simply from doing the task or from looking at the lump sums of line items like feed costs, the scare factor varies by individual. For people who prefer being out with the cows rather than in the office, it’s rarely a relished experience.
Iowa Beef Center extension program specialist Beth Reynolds said this year's income and expense numbers will mean different things to different people.
"In 2023 the cattle market has been hot, and a higher-than-average income is expected. On the flip side, expense increases quickly balance the equation," she said.
Farmers are accustomed to completing basic financial tasks at the end of the year such as an income statement, balance sheet, cash flow statement, updated inventory to reflect accurate livestock numbers, feed on hand, and grain in the bin. However, because 2023 has been so unique, here are a few year-end business tasks to benefit every operation.
Make an appointment with a tax accountant. Even if you haven’t utilized an in-person meeting with your accountant in the past, unique years like 2023 make the meeting time well spent. Options such as strategies for best claiming depreciation, income averaging, prepaying expenses, and IRA contributions, can help farmers make sound financial decisions.
"Often, we hear stories where people opt to buy equipment, etc. 'for tax reasons,' but a discussion with an accountant can help identify if and when those decisions are in the operation’s best interest long term," Reynolds said.
The Center for Agricultural Law and Taxation website has many Farm Tax Resources including an Interactive Schedule F and information on Iowa’s new tax laws impacting retired farmers. Also, Chapters 9 and 10 of the Estate and Succession Planning For the Farm workbook contains farm tax resources.
Incorporate enterprise analysis. An enterprise level look allows you to see which aspect of the operation is paying for your labor and which might be losing money.
The commercial herd, seedstock herd, feedlot, hay production, crop production, etc. can each be viewed as individual enterprises with their own financial reports. One Iowa Beef Center educational opportunity designed to help producers better understand methods to do this is Cattle in the Green, a multi-session, in-person course. Talk to your extension office if interested in bringing the course to your area.
Prioritize spending. Extra income often leads to increased spending. When making those decisions, be sure to identify needs and wants, and calculate a Return on Investment for each option. When comparing the returns, be sure to include potential bank CD rates and interest saving early debt payments.
Finally, after all (or even some) of the above actions are completed, be sure to back up your information. Although the technological world has many advantages in business management, things happen.
"Whether you work through your business plan on the computer or with pen and paper, get the information copied and saved in a secondary location," she said. "After completing dreaded paperwork tasks, the last thing you want is to go through the tedious process again."
The Iowa Beef Center at Iowa State University was established in 1996 with the goal of supporting the growth and vitality of the state’s beef cattle industry. It comprises faculty and staff from Iowa State University Extension and Outreach, College of Agriculture and Life Sciences and College of Veterinary Medicine, and works to develop and deliver the latest research-based information regarding the beef cattle industry. For more information about IBC, visit www.iowabeefcenter.org.
Beth Reynolds, ISU Extension and Outreach education specialist, 515-294-9881, firstname.lastname@example.org