Tips and tricks to streamline your farm office administration
When you’re applying for finance, refinancing a loan or purchasing land, good farm record keeping could be the difference between a stressful experience and a smooth worry-free experience.
Whether you’re going it alone or working with a broker, your financial institution wants more than just a completed application.
You’ll require evidence of your assumptions, so it helps to know which documents you need and where to find them.
In this blog, I’m going to share some tips on good farm record keeping. I’ll explain which records you should keep to make your annual review, land purchase or refinance easier.
I’ll also cover:
• Tips for organising and sharing documents
• Whether you should use hard copies or the cloud
• Useful resources and information
Making sense of the paperwork
Whether you’re operating with hard copy files or managing your business in the cloud; it’s important to know which files to keep, and for how long.
Having these files readily accessible (and up to date) will make the process so much easier when you need to secure finance. And having your paperwork in order so you can move quickly, might be the difference between securing a new property and missing out.
Land titles, ownership and values that correlate with council rates
What these documents include:
Here’s an example of the spreadsheet headings I set up for my clients:
- Description – Description on council rates
- C/T – Certificate of Title
- Owner – Entity that owns the land
- Known As – What do you call the block?
- Council Valuation – Valuer General Valuation
- Your Valuation – Your Valuation
- Hectares – No of hectares
- Security? – Does bank hold this as security yes/no
Why they are important: Having all the documents that confirm your ownership and value of the property is important for several reasons. Use it for a statement of position and to show the bank which parcels you’re offering for security.
How long you need to keep them for: Update annually or when you buy or sell land.
Yield and price averages for crops, grapes, sheep & beef
What these documents might include:
Here’s an example of grain yield & livestock sales data:
Why they are important: Having accurate data will allow you and your lender to get a picture of the average yield of your property. It will help you prepare budgets that reflect actual yields rather than optimistic projections. The bank will also use this data to justify numbers to their credit department, which is crucial when you’re securing long-term financing.
How long you need to keep them for: Ideally, you’ll have been keeping records for the life of your farm or business. But if you don’t (or you only have piles of paper records gathering dust), don’t panic. Start putting them together now and aim to build up so you have at least 5 years of data recorded, preferably in an electronic spreadsheet.
Spreadsheet cash flow budgets
What these documents are: A cash flow budget is an estimate of all cash receipts and cash expenditures expected to occur during a certain time period. It looks at money movement, not net income or profitability. By preparing your cash flow budget in a spreadsheet, you can easily update it. Your lender can also easily sensitise the income or expenses.
Why they are important: Many businesses fail because of an extended period of poor cash flow. This can cause the depletion of cash and the ability to borrow additional capital. While this concept is simple, the challenge is to continually monitor cash flow in and out by comparing your budget to actuals.
A cash flow budget is a useful management tool because it:
- forces you to think through your farming plans for the year
- tests your farming plans, such as if you will produce enough income to meet all your cash needs
- projects how much operating credit you’ll need and when you need to repay loans
- provides a guide for comparing your actual cash flows
- helps you communicate your farming plans and credit needs to your lender
How long you need to keep them for: Prepare budgets for at least one year, but if your cash flow is tight or you are expanding your business, forecast for 2 or 3 years. It’s also good to keep previous budgets on file to refer to.
List of plant and equipment with values
What these documents are: A simple spreadsheet listing your larger pieces of equipment and their value.
Why it’s important: This is useful for insurance purposes, completing your statement of position and gives potential lenders an overview of the age of your plant and equipment.
How long you need to keep the record for: Keep your plant and equipment lists up to date and ensure you update the values of your equipment every year.
Equipment finance register and replacement plan
What these documents are: As the name suggests, you should have a register listing each piece of equipment and the details of the finance on it. How much is owing, when payments and due and the term of the loan. It should also include details of when you’ll need to replace the equipment.
How long you need to keep the record for: Obviously, you’ll need to keep this record for the term of the equipment finance and as long as you own the equipment. But it’s also a valuable record to help you forecast replacement times on other equipment.
Farm record keeping – cabinet or the cloud?
If you’re still storing all your files and records in a filing cabinet in the office, you’re not alone. And while many businesses are moving to online and cloud storage, there are pros and cons of both options.
Having paper records on-hand may seem the easiest option, especially if you’re not comfortable with technology or have limited internet connectivity. But properly filing and storing hard copy information can be time consuming and takes up a lot of space. There’s also the risk of losing records to fire, water damage or pests.
Cloud based systems offer many advantages around accessibility, data security and space. Being able to access records from anywhere with an internet connection allows for real-time collaboration and remote access. Most online solutions these days have robust data backup and disaster recovery measures, reducing the risk of data loss. Cloud-based systems also provide search and filtering capabilities, making it easier to locate and analyse specific records.
Limited internet connectivity is one reason why many farms and agribusinesses do not want to move to the cloud. But localised back-ups can be an option. While data security is always a concern, there are programs and support to help you minimise risk.
You need to decide what will work for your farm or agribusiness based on your needs, technological capabilities and risk tolerance.
For some of my clients, taking a hybrid approach and keeping a set of current paper files alongside the information stored in the cloud, is the best way to ensure accurate and accessible record-keeping.
Resources to improve your agribusiness and farm record keeping
If you’d like to read more about farm record keeping and data management, here are a few useful resources:
- National Farmers Federation – Data and Connectivity
- ATO – Record Keeping in Primary Production
- Farm Software and Apps to Help You Out with Peter Barker – Farms Advice Podcast
- Collecting Basic Data On-Farm with Bill Hoffman – Farms Advice Podcast
And of course, I’m always available to talk with you about the best options to suit your farm or agribusiness.
Good farm record keeping is good for business
Keeping accurate and up-to-date records isn’t just about securing new finance or refinancing existing loans.
It also helps with:
Financial management – having a clear picture of the financial position of your farm will help you make informed decisions about budgeting, cash flow management and overall profitability.
Making tax time less stressful – keeping accurate records will streamline the process of submitting your tax return and ensure you have the documentation for any claims.
Operational efficiency – maintaining accurate data and records can help you identify areas of inefficiency, excessive costs or underperforming areas of your business. Having the right information on hand can help you improve productivity, efficiency and costs.
While the thought of getting all your records in order might seem overwhelming, it will pay off in the long run. Work with your bookkeeper, accountant or broker to develop systems that will make staying on top of your records and paperwork a breeze.
Over to you
How would you rate the record keeping in your farm or agribusiness office? Do you have some homework to do before your next tax return or loan review?
If you’d like some help to identify the best agrifinance options for your farm or agribusiness, please get in touch. If you have comments and questions, I’d also love to hear from you. And, if you liked this article, I’d love you to share it.