basic accounting for farmers. disclosures & disclaimers the numbers in this presentation are...
TRANSCRIPT
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Basic Accounting for Farmers
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Disclosures & Disclaimers
The numbers in this presentation are fictitious and used for illustrative purposes only.
Financials and Numbers are consolidated for presentation purposes.
As you plan and project for your own business, you will need to research and calculate the financial data based on your specific economic reality.
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Agenda
1. Introductions and Goals for this Webinar
2. Income Statement
3. Balance Sheet
4. Cash Planning
5. Budgeting
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Develop Building Blocks
Understand Basic Accounting
Develop Systems for Tracking your finances
Track and Measure your progress
Plan for growth and profit
Accounting For Farmers Part I
QuickBooks Webinars
We are here!
End Game!
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Today’s Goals
Evaluate the health of your business by reviewing the Income Statement
Use the Balance Sheet to Understand Cash Flow
Develop tools to manage Cash Flow
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Income StatementWhen to use: Understand the profitability of your business, as
well as the nuances of your different products lines and revenue streams.
Project the profitability of a new venture. File your taxes.
Key Details: Business activity over a period of time Activities directly related to the operation of
your business, as well as indirect activities Total revenue, total expenses and net profit.
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Income Statement
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“Troubleshooting” Profitability
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“Troubleshooting” Profitability
Revenue Is it going up or down?
COGS Are you marking up resale items enough?
Operating Expenses What are the major expenses?
Operating Profit Is it positive?
Other Income & Expenses Are they driving losses?
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2009 2010 2011 2012 Farm Income
CSA Revenues 16,500 23,750 32,250 40,000Farmers Market Sales 27,492 27,519 27,547 27,575Grant NA 25,000 NA NA
Total Income 43,992 76,269 59,797 67,575
Less Cost of Goods Sold 2,508 2,600 2,600 2,600
TOTAL GROSS INCOME $41,485 $73,669 $57,197 $64,975
EXPENSESAdvertising 362 100 100 100Dues & Publications 500 500 500 500Equipment 5,374 25,000 2,000 2,000Feed (grain) 3,632 3,995 4,394 4,834Fertilizer & Lime 1,704 1,874 2,062 2,268Gasoline/Fuel/Oil 2,544 3,053 3,664 4,397Insurance 2,250 2,588 2,976 3,422Labor Hired (Payroll) 10,250 11,655 11,888 12,125Postage 192 195 200 200Professional Fees 1,600 1,600 1,600 1,600Repairs & Maintenance 3,283 3,500 3,800 4,000Seeds & Plants 1,696 3,000 3,240 3,499Supplies 2,777 3,500 4,000 4,000Taxes 6,790 6,790 8,000 8,000Telephone 1,068 1,100 1,100 1,100Trash 111 450 450 450Utilities 2,130 2,237 3,141 3,298Veterinary 95 100 100 100Website/Marketing 510 60 60
TOTAL EXPENSES $46,357 $71,746 $53,274 $55,953
NET PROFIT/ LOSS -$4,872 $1,923 $3,923 $9,022
The Schedule F- Income Statement
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Challenge #1 Grants are included in Revenue
2009 2010 2011 2012Farm Income
CSA Revenues 16,500 23,750 32,250 40,000Farmers Market Sales 27,492 27,519 27,547 27,575Grant 0 25,000 0 0
Total Income 43,992 76,269 59,797 67,575
Feed (grain) 3,632 3,995 4,394 4,834Percent of Income 8% 5% 7% 7%
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2009 2010 2011 2012EXPENSES
Advertising 362 100 100 100Dues & Publications 500 500 500 500Equipment 5,374 25,000 2,000 2,000Feed (grain) 3,632 3,995 4,394 4,834Fertilizer & Lime 1,704 1,874 2,062 2,268Gasoline/Fuel/Oil 2,544 3,053 3,664 4,397Insurance 2,250 2,588 2,976 3,422Labor Hired (Payroll) 10,250 11,655 11,888 12,125Postage 192 195 200 200Professional Fees 1,600 1,600 1,600 1,600Repairs & Maintenance 3,283 3,500 3,800 4,000Seeds & Plants 1,696 3,000 3,240 3,499Supplies 2,777 3,500 4,000 4,000Taxes 6,790 6,790 8,000 8,000Telephone 1,068 1,100 1,100 1,100Trash 111 450 450 450Utilities 2,130 2,237 3,141 3,298Veterinary 95 100 100 100Website/Marketing 510 60 60
TOTAL EXPENSES $46,357 $71,746 $53,274 $55,953
Challenge #2 Expenses aligned to Schedule F, not business reality
Direct Cost of AnimalsLiability? Vehicle?
Employees?Payroll Tax? Property Tax? Income Tax?
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Income Statement:Organize to Extract Meaning
Revenue Net Sales
COGS Produce & Products for Resale
Gross Profit = Revenue - COGS Operating Expenses
Direct Operating Labor Occupancy General and Administrative (G&A) Repairs and Maintenance
Operating Income = Gross Profit – Expenses Other Income & Expense
Grants Depreciation Interest Expenses
Net Income = Operating Income + Other Income & Expenses
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Income Statement - ExampleRevenue Payroll Repairs and MaintenanceCSA 13,528 Labor Hire 44,252 Car and Truck 4,261 Farmers' Markets 139,032 Taxes: Payroll 4,868 Gasoline 6,556 Wholesale 7,726 Workman's Comp + Disability 2,000 Repairs and Maintenance 819
Seedling Sale 3,610 Total Payroll 51,119 Tools 1,311 Total Revenue 163,896 Total Repairs and Maintenance 12,948
General and AdministrativeCost of Goods Sold 30,779 Accounting Services 300 Occupany
Advertising 819 Rent 3,325 Gross Profit 131,116 Bank Fees 144 Utilities 3,000
Insurance (excluding health) 800 Total Occupany 6,325 Direct Operating Expenses Continuing Education 100 Booth Fees 2,500 Meals and entertainment 164 Total Operating Expenses 101,090 Equipment 3,278 Offi ce supply 819 Fertilizer and Lime 1,639 Permits and licenses 50 Operating Income 30,026 Mulch 5,736 Professional fees 500 Pest Control 1,475 Subscriptions 100 Depreciation 16,239 Seeds and Plants 3,278 Work Clothes 300 Interest Expense 2,548
Soil Tests 500 Total General and Administrative 4,097 Taxes 48 Supplies 8,195
Total Direct Operating 26,601 Net Income 11,192
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Common-Size Numbers
Payroll
Labor Hire 44,252 49,644 53,392
Taxes: Payroll 4,868 5,461 5,873 Workman's Comp + Disability 2,000 2,000 2,000
Total Payroll 51,119 57,105 61,265
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Revenue
CSA 13,528 14,475 17,633 Farmers' Markets 139,032 148,764 153,202 Wholesale 7,726 9,271 10,661 Seedling Sale 3,610 3,951 4,140 Total Revenue 163,896 176,461 186,637
Payroll
Labor Hire 44,252 49,644 53,392
Taxes: Payroll 4,868 5,461 5,873
Workman's Comp + Disability 2,000 2,000 2,000
Total Payroll 51,119 57,105 61,265
31% 32% 33%
Common-Size Numbers
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Is Revenue Going Up Or Down?
2013 2014 2015 2013 2014 2015
Revenue
CSA 13,528 14,475 17,633 8% 8% 9%Farmers' Markets 139,032 148,764 153,202 85% 84% 82%Wholesale 7,726 9,271 10,661 5% 5% 6%Seedling Sale 3,610 3,951 4,140 2% 2% 2%Total Revenue 163,896 176,461 186,637 Percentage Annual Growth 8% 6%
2013 2014 2015 2013 2014 2015
Revenue
CSA 13,528 14,475 17,633 8% 8% 9%Farmers' Markets 139,032 148,764 153,202 85% 84% 82%Wholesale 7,726 9,271 10,661 5% 5% 6%Seedling Sale 3,610 3,951 4,140 2% 2% 2%Total Revenue 163,896 176,461 186,637 Percentage Annual Growth 8% 6%
Percent of Total Revenue
Growth Rate = (new-old)/old
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Revenue
CSA 13,528 14,475 17,633 Farmers' Markets 139,032 148,764 153,202 Wholesale 7,726 9,271 10,661 Seedling Sale 3,610 3,951 4,140 Total Revenue 163,896 176,461 186,637 Percentage Annual Growth 8% 6%Cost of Goods Sold 30,779 37,292 40,327
Percent of FM Revenue 22% 25% 26%
COGS: Are you marking up resale items enough?
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Review Expenses [[Click to Excel Spreadsheet]]
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Questions?
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The Balance Sheet When to use: Provide to potential lenders To help in cash planning To understand the changes of your business
Key Features: A snapshot in time, usually at the end of the
fiscal year or month that details what the business has (assets) and how it got them.
It shows who has claims to your assets – whether it is you/your business or someone else.
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The Balance Sheet
Assets Liabilities Owners’ Equity
What You Have
•Cash•Inventory•Equipment and Buildings•Breeding Stock
Equation
What You Owe What You Own
•Accounts Payable•Credit Cards•Bank Loans and Lines of Credit
•Net Income•Investors Equity•Owners Equity
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Balance Sheet – Example #1Dec 31, 10 Dec 31, 11 Dec 31, 10 Dec 31, 11
ASSETS LIABILITIES & EQUITY
Cash/Bank Balances 31,643$ 11,102$ Liabilities
Total Current Assets 31,643$ 11,102$ Long Term Liabilities
Fixed Assets Promisary Note 15,400$ 12,300$
Buildings Total Long Term Liabilities 15,400$ 12,300$
Farmstand 12,526$ 16,826$ Total Liabilities 15,400$ 12,300$
Greenhouse 21,798$ 32,598$
Road 17,400$ 17,400$ Equity
Total Buildings 51,724$ 66,824$ Opening Balance Equity (0)$ (0)$
Partner Equity 67,362$ 67,362$
Machinery & Equipment Retained Earnings 58,672$ 99,381$
Fencing 3,327$ 6,327$ Total Equity 126,034$ 166,743$
Equipment/Vehicles 45,900$ 84,150$ TOTAL LIABILITIES & EQUITY 141,434$ 179,043$
Irrigation 13,282$ 13,282$
Office Equipment 197$ 197$
Tools 2,427$ 5,427$
Total Machinery & Equipment 65,133$ 109,383$
Accumulated Depreciation (7,066)$ (8,266)$
Total Fixed Assets 109,791$ 167,941$
TOTAL ASSETS 141,434$ 179,043$
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Where’d the Money Go? Your
business is profitable, but cash is tight.
Dec 31, 10 Dec 31, 11 Change
ASSETS
Cash/Bank Balances 31,643$ 11,102$ (20,542)$
Total Current Assets 31,643$ 11,102$ (20,542)$
Fixed Assets
Buildings
Farmstand 12,526$ 16,826$ 4,300$
Greenhouse 21,798$ 32,598$ 10,800$
Road 17,400$ 17,400$ -$
Total Buildings 51,724$ 66,824$ 15,100$
Machinery & Equipment
Fencing 3,327$ 6,327$ 3,000$
Equipment/Vehicles 45,900$ 84,150$ 38,250$
Irrigation 13,282$ 13,282$ -$
Office Equipment 197$ 197$ -$
Tools 2,427$ 5,427$ 3,000$
Total Machinery & Equipment 65,133$ 109,383$ 44,250$
Accumulated Depreciation (7,066)$ (8,266)$ (1,200)$
Total Fixed Assets 109,791$ 167,941$ 58,150$
TOTAL ASSETS 141,434$ 179,043$ 37,608$
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Balance Sheet – Example #2Dec 31, 11 Dec 31, 11
ASSETS LIABILITIES & EQUITY
Current Assets Liabilities
Checking/Savings 18,796.86 Current Liabilities
Accounts Receivable 18,366.85 Accounts Payable 11,281.63
Total Current Assets 37,163.71 Credit Cards 1,595.19
Federal Taxes Payable 1,183.88
Fixed Assets Payroll Liabilities 1,119.62
Land 185,000.00 State Taxes Payable 4,897.73
Machinery & Equipment 364,551.56 Total Current Liabilities 20,078.05
Structures 301,217.58
Vehicles 101,498.00 Long Term Liabilities
Accumulated Depreciation (521,148.49) Mortgage 312,263.25
Total Fixed Assets 431,118.65 Total Long Term Liabilities 312,263.25
Total Liabilities 332,341.30
TOTAL ASSETS 468,282.36
Equity
Opening Bal Equity 40,545.99
Owner's Withdrawal -33,229.76
Retained Earnings 78,713.74
Net Income 49,911.09
Total Equity 135,941.06
TOTAL LIABILITIES & EQUITY 468,282.36
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Questions?
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Managing Cash Flow Create a budget
Track Cash Flow
Compare Budget to Actuals
Make Adjustments
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Creating a Budget (Projections) Review Previous Year Consider Changes for coming year Outline
Revenue Expenses Capital Purchases Financing
Check Cash Flow Adjust as Necessary
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Cash Flow BudgetAccounts
2014 Actuals
January February MarchRevenues
SalesCSA 13,597$ 17,500 40 1,000 4,000 Farmers Markets 70,347$ 71,000 Winter Farmers Market 8,228$ 11,500 1,800 1,300 1,300 Special Order 4,603$ 4,500 500
Total Revenues 125,430$ 137,500 3,690 3,500 6,300
ExpensesDirect Operating
Ag Supplies 2,052$ 2,100 690 400 Animals
Animal Feed 2,279$ 2,500 1,250 Animal Supplies 497$ 1,000
Cover Crop Seed 150$ 1,200 72 1,128 Fertilizers and Lime 2,995$ 3,800 1,437 1,263 1,100 Harvest/Storage Bins 356$ 356 122 Insect and disease control 108$ 200 63
Net Cash Flow 32,900$ (7,042) (2,472) (9,787)
Cash Flow Beginning Cash 50,688 43,646 41,174 Ending Cash 43,646 41,174 31,388
2015 Projections (Monthly) 2015 Projections
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Weekly Cash Planning – Example #1
Item Amount Where to find the numbers
Beginning Cash Balance
$4,075 Check Register (QB) or Balance Sheet
Bills due this week - 1,386 Balance Sheet (A/P) or QB
Other payments expected
- 1,500 Projections
Cash Expected this week
+ 1,500 Projections
Payments from Customers Expected
+ 1,000 Balance Sheet (A/R) or QB
Cash to set aside -1,000 Budget
Cash Available $2,689
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Weekly Cash Planning – Example #2
Item Amount Where to find the numbers
Beginning Cash Balance
$4,075 Check Register (QB) or Balance Sheet
Bills due this week - 2,386 Balance Sheet (A/P) or QB
Other payments expected
- 4,500 Projections
Cash Expected this week
+ 1,500 Projections
Payments from Customers Expected
+ 1,000 Balance Sheet (A/R) or QB
Cash to set aside - 1,000
Cash Available - $1,311
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Questions?
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Thank you!
More resources:
http://www.juliashanks.com/tools-for-entrepreneurs/
Email: [email protected]
Call: 617-945-8718
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Depreciation & Accumulated Depreciation Example: You Buy a tractor for $5,000 on January 1. You anticipate it has 5 year life, and at the end of year 5, it has no value
ANNUAL DEPRECIATION EXPENSE
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
$2,000 Accumulated Depreciation after 2 years
$3,000 Accumulated Depreciation after 3 years
$4,000 Accumulated Depreciation after 4 years
$1,000 $1,000 $1,000 $1,000 $1,000