A good system is easy to use, provides essential information in a timely manner and has an appropriate level of detail for the type of operation. Components of a record keeping system include:
- A business checking account and/or credit card to handle all business transactions
- An income ledger to keep track of all business income
- An expense ledger to record business expenses
- An inventory that includes the physical count (number) and value assignment (how much is the inventory worth)
- A depreciation schedule to pro-rate the original costs of durable assets over more than one accounting period
- A net worth statement or balance sheet which summarizes assets and liabilities
- An income or profit/loss statement that lists receipts and expenses by type
- Cash flow statement to measure the flow of funds into and out of the enterprise throughout the accounting period
- Enterprise records which list income and expenses by type
Today, many farmers and business owners use a commercial financial software program for recordkeeping. These programs can analyze your operation and generate most of the reports listed above. But they are only as good as the data entered. Set a specific time to match expenditures with invoices and receipts. Remember that electronics fail and paper can disappear in a storm or a fire. Regularly back-up your financial software to a flash drive or other removable device. Copy or scan important documents, warranty information etc. and keep a copy or a flash drive in your safe deposit box.
For more information on farm and business record keeping, contact the Economic Development Center at 250-5551.