New Year Is Prime Time to Review Farm Financial Statements

Financial statement tools can help farmers easily track their numbers
January 2, 2020, 9:00 am | Ann Johanns, William Edwards

AMES, Iowa – As farmers enter 2020, now is an ideal time to revisit financial statements.
In the December edition of Ag Decision Maker, updated files are available to help farmers with their net worth statement, farm income statement and financial performance measures.
 
William Edwards, professor emeritus in economics at Iowa State University, said most farmers use calendar-year accounting, so the end of the year is prime time for wrapping up farm financial numbers.
 
He said meetings with lenders usually happen in January and February, and that completing financial statements now will give farmers a head start on the process.
 
“One of the things that ag lenders always ask for is updated financial statements. The earlier we sit down and pull that information together the more accurate it’s going to be,” Edwards said.
 
The net worth statement helps farmers track assets and liabilities, and includes the land, livestock, equipment and other items used in the operation.
 
The farm income statement, sometimes called a profit and loss statement, provides a summary of income and expenditures during a specific year.
 
According to Edwards, most farm families do a good job of keeping records of income and expenses for the purpose of filing income tax returns. However, values from the tax return “may not accurately measure the economic performance of the farm,” and consequently, farmers need the broader perspective provided by a good farm income statement.
 
Financial performance measures help farmers evaluate how they’re doing compared to other Iowa farmers, using data compiled by the Iowa Farm Business Association.
 
By using the Financial Performance Measures tool, farmers can track their liquidity, solvency, profitability, financial efficiency and repayment capacity, to create multi-year comparisons of their farming operation.
 
This month’s Ag Decision Maker also includes timely information about farm bill meetings, and the 2019 Farmland Value Survey.
Also Attend Grundy County's Estate Planning Seminar: For Rural and Urban Families on January 28th, 2020. Registration deadline: January 21st, 2020.
 
Category: Farm Management
 
About the Authors:
 
Ann Johanns
Department of Economics
641-732-5574
aholste@iastate.edu
 
William Edwards
Economics
515-294-6161
wedwards@iastate.edu 

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