Two Musts to Discuss With Your CPA
The cyclical downturn in agriculture that we’ve been experiencing may well continue into 2018, depending on who you’re talking to. In these difficult times, it’s your accountant as a partner and guide that can provide critical information before you enter into discussions with your lender. Julie Spiegel, a CPA for Varney and Associates of Manhattan, Kansas, specializes in agricultural tax planning, preparation, financial analysis, and consulting in farming and ranching. She gives advice on two topics that you and your CPA should discuss:
Balance Sheet Strength:
- Figure out your working capital (assets such as cash, receivables, and inventory less current liabilities like a line of credit, payables, and the current portion of long-term debt).
- If working capital is negative, consider restructuring loans so you pay them off over a longer period of time.
- Review your balance sheet for under-performing assets such as a tract of land, equipment, or rolling stock. Consider selling these assets before the market becomes saturated.
Enterprise and Break-Even Analysis:
- If your operations are diversified, set up a book-keeping system that can track profitability by specific endeavors such as various crop types, hay or cattle. Having these income statements by enterprise will help you make decisions regarding marketing and costs, and may even lead to the elimination of a particular activity because it’s not making money.
- After you educate yourself about the profitability of each of your ventures, ask your accountant to assist you in determining the break-even point for each one. This will be helpful in promoting and selling your products, avoiding losses. It will also help with next year’s budgeting and monitoring input costs for seed, fertilizer, chemical and feed.
Knowledge is power, so make sure you maintain a close, quality relationship with your tax advisor. Doing so will keep you on the farm and will keep money in your pocket.
-Terry Olson, Titan Outlet Store Team