MSU Extension Farm Management

The MSU Farm Records Book for Management is a booklet that has been sold for decades at local MSU Extension offices throughout Michigan to help farmers keep accounting records by hand. While its paper version continues to be available for sale, both at local MSU Extension offices and online through the MSU Bookstore.

It is also available for free online, to be either printed at home by clicking the download link above or used as a spreadsheet.

Farm Records Book for Management spreadsheet

The updated version offers additional features, making it useful both for those who need a handwritten recordkeeping tool and for those who use a different recordkeeping system but are looking to better understand their financial health.

Farm Records Book for Management to assists farm managers in collecting, organizing and analyzing their farm's data in order to make better decisions. It focuses on two parts of the farm business management annual cycle:

Tax management and filing

• One useful feature of the book is that it categorizes income and expenses the same way the IRS tax forms do, making the calculation of totals for taxes easy.
• It helps summarize income and expenses for each category in your journal by month, by quarter, for the year until November and for the year until December. This is especially useful for year-end tax management purposes.
• The book includes sample tax forms that can be used to make initial calculations of farm tax liability before the end of the year for management purposes, or after the end of the year in preparation for filing. Included is a sample of the farm tax form (Schedule F) as usual, but has also added samples of Form 1040, Schedule 1 (Additional Income and Adjustments to Income), Schedule A (Itemized Deductions), Schedule SE (Self-employment tax) and the Michigan Income Tax form.
• Labor, sales and purchases of capital items and loans have special recordkeeping requirements. The book includes tables specific to track them.

Financial analysis

• The book includes space to create a statement of cash flows that monitors the accuracy of the information entered. It reconciles the cash at the beginning of the period, the income and expenses, and verifies that the ending cash value adds up. Being aware of any discrepancies is the first step to making any adjustments needed for accurate analysis.
• The Cash Flow Statement Analysis section provides a glimpse into the farm’s liquidity, comparing how much cash is coming from operating activities (ideal), financing activities (debt) or investing activities (asset purchases/sales). 
• Creating a balance sheet at least once a year is the best practice and can help monitor financial health, regardless of the recordkeeping style that is used. The book has always included space for doing so, and the new version has added more space for entering details, plus a one-page summary of net worth and how it has changed from the previous year (known as the Statement of Owner’s Equity).
• The book now includes an accrual-adjusted profit and loss statement (also known as an accrual-adjusted income statement). This is different from a cash income statement where cash income and cash expenses are summarized, and a net cash income value is calculated. The cash income statement is not a good reflection of farm income, as it doesn’t account for inventory changes. Net cash income could be negative if you had high expenses while growing your inventory. Or, conversely, it could look great when liquidating the farm. An accrual-adjusted income statement corrects the farm cash income for inventory changes that occurred during the year, allowing for more accurate tracking of financial performance throughout time.
• A financial ratios scorecard. Ratios are useful when comparing the relative financial condition of the business with others, with the farm owner over time or with alternative potential scenarios. This is because ratios provide a standard metric independent of business size. Average ratios for various types of farms can be found at http://www.finbin.umn.edu or http://www.canr.msu.edu/telfarm/business-analysis-summaries.
• Break-even calculations to find at what price covered farm costs, both in terms of operating costs and accounting for the potential replacement cost of fixed assets.
• Thorough explanations of farm accounting, economic and financial concepts.

The Farm Records Book is not intended to replace an accountant, tax preparer or financial analyst’s work. It is intended to empower farm owners to have a more informed conversation with them. 

If you discover any bugs or flaws with the Farm Records Book, please contact  Florencia Colella at colellaf@msu.edu or 231-224-6439. We suggest you consider filling in this form to updated resources, answers to common questions, notices of future farm business management events, and other useful information.

Michigan State University Extension has many other resources available, including bookkeeping and financial analysis tools to help you with the important decisions you must make as a farm manager. Many of these resources, along with MSU Extension farm management educators can be found at the MSU Extension Farm Management website: https://www.canr.msu.edu/farm_management.