Farm and Finance

By Brian Ravencraft

The recent enactment of H.B. 33 of the 135th Ohio General Assembly has changes that may eliminate the requirement for many businesses to file the Ohio CAT tax. H.B. 33 increases the CAT exclusion to $3 million in taxable gross receipts for tax periods beginning in 2024 and $6 million for tax periods beginning in 2025. The CAT rate will remain at .26% for taxpayers with taxable gross receipts exceeding these increased exclusion amounts. Combined or consolidated elected taxpayer groups are treated as one taxpayer. The annual filing minimum tax (AMT) will be eliminated after the 2023 annual return. Only quarterly returns will be accepted beginning in the calendar year 2024.

What this means for taxpayers

Annual taxpayers must file their 2023 return by May 10, 2024. Since the annual minimum tax for 2023 was prepaid with the 2022 return, no tax will be due with the final return unless taxable gross receipts exceeded $1 million in 2023.… Continue reading

By Brian Ravencraft

Financial practices that business owners and farmers implement and then do repeatedly over time tend to be beneficial. One of those practices is known as “closing the books” or the “month-end closing” process. I am not just speaking in accountant slang; these are actual exercises that can set any business up for success and can save the owner many headaches when the end of the year arrives.

The month-end closing process is something you can set up with your accountant. This will be conducted at the end of every month and will allow you and the accountant to really take a deep dive into the finances of the business. This will be the time to reconcile any mistakes and to plan for upcoming expenses. Doing this simple exercise will also allow you to prevent lost revenue, plan for tax obligations and more.

The month-end process can look different for different businesses, but it typically includes actions such as: reviewing the balance sheet and financial statements, reviewing accounts payable and accounts receivable, examining journal entries in accounting software, evaluating income and expenses, reconciling accounts, and reviewing fixed assets.… Continue reading

By Brian Ravencraft

I am sure you have heard the saying “cash is king” when it comes to business. There is some truth to this statement for sure because when cash flow is tight, stress certainly sets in for any business owner. Ideally the cash is always flowing, but that isn’t always the case. Let’s look at some moves you can make when cash is slowly making its way in:

• When money is tight, purchasing expensive new equipment falls to the bottom of the to-do list. However, if you still need certain equipment to keep operations afloat, investigate repairing what you already have on the farm. Or you can shop for refurbished equipment. Purchasing new equipment does present tax savings in most cases, but that won’t help with the cashflow when things are tighter than normal.

• Perhaps you have equipment collecting dust on the farm. If you have machinery you no longer use, now would be the time to investigate selling it.

By Brian Ravencraft

I have talked in past articles about the importance of being on the lookout for tax scams. Now is a good time to revisit this topic because these scams are becoming more and more sophisticated by the day. Remember, the Internal Revenue Service (IRS) will never reach out to you via phone and/or email. Official communication only comes through the United States Postal Service. This is the number one reminder I can give you before moving on with the rest of this article.

At the firm where I am a principal, we help our clients identify these scams. Let us outline a recent one we helped a client navigate. The client received an email from an address that was posing as the IRS. The message contained an image resembling the IRS logo. The message said they were writing to inform the taxpayer about an important matter regarding a recent tax return filing.… Continue reading

By Brian Ravencraft

Due to any number of reasons, many businesses just don’t make it. They have no choice but to cease operations. If only it was as easy as locking the door and never looking back. The proper tax documents must be filed in order to shut down operations properly and without penalty.

You must file a final income tax return and some other related forms for the year your business shuts down. The type of return to be filed depends on the type of business you have.

If you are a Sole-Proprietorship, you will file a Schedule C Form 1040 return that is known as a profit or loss from business. This will go along with your personal return. You will also need to account for any self-employment tax.

If you operated as an S-Corporation, you would file a Form 1120-S for the year of closing. Your accountant will also have you report capital gains and losses on a Schedule D while also checking the box that shows this will be the final return for the business.… Continue reading

By Brian Ravencraft

Sometimes farming is considered a hobby. The farmer grows crops or keeps livestock for enjoyment reasons. Profit does not come into play. An operation run like this is known as a hobby farm. The other side of the coin is farming for profit. These farm operations are carried out with the purpose of making money in mind. However, the lines can get blurry. A hobby farm can turn into a business for one reason or another.
Taxpayers must be aware of the distinction between a hobby farm and a business farm. The Internal Revenue Service (IRS) is always a good resource to turn to for clarification on this matter. Here is a list of factors they share regarding whether farming activity if a business or hobby:

• The taxpayer carries out activity in a businesslike manner and maintains complete and accurate books and records.

• The taxpayer puts time and effort into the activity to show they intend to make it profitable.… Continue reading

By Brian Ravencraft

I have talked about business budgets in past articles, but it has been a while. To me, it is always a topic worth circling back around to. I see many agribusiness owners operating without a budget. Sometimes it is a very loose one. It should be no surprise that as an accountant, I don’t recommend this. Businesses of all sizes need to have a budget in place. They need to be realistic and meticulous when creating it. They need to then abide by it, but also revisit it often as the business evolves. This is especially true when it comes to farming and agribusiness. So many elements, such as the weather, regulations, and more can change the financial course of your business and a budget can be a lifesaver when navigating difficulties. 

Without a budget you are opening the door to some very large risks and many headaches.… Continue reading

By Brian Ravencraft

Are you looking to stabilize the financial health of your business? Do you wish your cash flow was more consistent? Reviewing and revamping your billing and collection efforts is the first step to achieving these goals. 

A good lens to look through first is the one that focuses on the things you can control, such as quality of your products or services, and the efficiency of order fulfillment and distribution processes. All these elements can significantly impact collections. You give customers an excuse not to pay when an order arrives damaged, late, or not at all. Other mistakes include incorrectly billing a customer or failing to deliver on promised discounts or special offers.

We are all human and mistakes happen, but make sure you resolve billing mistakes quickly and ask customers to pay any portion of the bill they’re not disputing. Once the matter is resolved and the product or service has been delivered, ask the customer to pay off the bill.… Continue reading

By Brian Ravencraft

As we near the end of what is known as “busy season” in the accounting world, chances are you have been in touch with your accountant quite a bit lately. Tax filing season requires a good deal of communication between the professional preparing the returns and the taxpayer filing them. However, you really should be in constant contact with your accountant. View them as a year-round partner that can help you assess any financial situations that pertains to your farm or agribusiness. 

Let’s go over an example of something your accountant can help you with year-round —something that is the life blood to any business owner. I am talking about cash flow. Your accountant is your partner and can help you monitor the money going in and out of your business. With the help of one of the many sophisticated accounting software offerings available to business owners, you can watch the cash flow in and out of your operation in real-time.… Continue reading

By Brian Ravencraft

It is nearing the month of March, which means tax season is well underway. We call it “busy season” in the accounting biz, and let me tell you… it lives up to the nickname. 

As accountants we worry about many things on behalf of our clients. We want to keep them compliant, help them file on time or secure an extension. Of course, we want to save them as much money as we can. The list goes on and on. At the top of that list is always keeping their information safe and secure. From financial information to data related to their identity, it all must be protected from the scams we see not only during tax season, but year-round. 

For the purposes of this article, let’s take a look at the fraud you want to bypass during filing season. The IRS has a comprehensive list of tips on their website that all taxpayers should pay close attention to.… Continue reading

By Brian Ravencraft

We are now well into the first quarter of a new year. My wish for all of you is that 2023 is a healthy, happy and financially sound and successful year. The best way to set the tone for a great year is to start things off on the right foot. I asked some of my colleagues at Holbrook & Manter to share some of their best tips of setting the right tone for a successful year ahead. Enjoy their tips below.

Keep your accounting records up to date throughout 2023. If you don’t have the time as a small business owner, hire a bookkeeper or outsource it, but make sure the accounting records stay up to date at least on a monthly basis. If you wait too long to update your accounting records you won’t have real-time data to make management decisions and you will be scrambling at the end of the year to reconcile a years’ worth of activity to file a tax return.… Continue reading

By Brian Ravencraft

What are KPIs and how can they help you run a successful agribusiness? KPI stands for Key Performance Indicator. These are measures that are both financial and non-financial in nature that help you measure the overall health of your operation. Of course, the types of KPIs you put in place will vary from industry to industry, but in farming, we usually look at these top ones with our clients.

Finance 

Here, we are looking to really measure and understand the financial health and capabilities of your business. For example, we will look at your available assets, measure profitability by taking a look at your ability to generate revenue, your ability to and how you pay for all of your financial obligations during your fiscal year, etc. We will also use this KPI to take a look at growth opportunities. If we find that one area of the operation is bringing in more profit than others, we will talk about ways to build upon this.… Continue reading

By Brian Ravencraft

The end of 2022 is upon us. In fact, it is almost here. What year-end clean-up and planning exercises should business owners and farmers be taking part in before the year draws to a close? I asked some of my colleagues at Holbrook & Manter to weigh in. See their tips below.

The end of the year can be a busy time for small business owners with the holidays, and wrapping up projects before the New Year. However, it is not the time to forget about financial planning and taxes. Small business owners should be ensuring their books are up to date and accurate. This can help in determining where they can expect profits to be for the year. Once this information is together, they should be working very closely with their tax accountant to ensure they are prepared for any taxes they may owe, as well as to utilize any tax savings.… Continue reading

By Brian Ravencraft

Succession planning, even under the best of circumstances, can be scary, emotional, and draining. But it can also be rewarding and give you a sense of clarity about your future and the future of your business.

The best starting point is to contact the person you hold in the highest regard when it comes to the finances of your farm operation. Usually, a CPA with experience in agribusiness and wealth planning is a great starting point. Not only will they be able to address your needs from financial statements to family matters, but you should discover that their background creates a special level of caring and investment in your needs and the future needs and success of your operation.

Once you have set a date to meet with your trusted advisor, it is time to gather some important information. Here is a checklist of financial information and documents you will need to start things out on the right foot.… Continue reading

By Brian Ravencraft

Every agribusiness owner and farmer needs to understand the importance of maintaining and reviewing financial statements.

Think of these statements as a map of where the money for your business is coming from and where it is going. These statements are true records of your financial activity. These are the documents that let you understand the financial health of your business and allow you to make smart financial moves in the future.

These are the three types of financial statements:

1. Income Statement: This statement displays your company’s new income growth or loss. The statement covers a certain period of time. You may hear your accountant refer to this as your profit and loss statement. Or “P&L” for short.
2. Balance Sheet: This document looks at your business’s net worth at a given point in time. This is the document you turn to when you want to get a feel for where you stand regarding assets and liabilities and equity.

By Brian Ravencraft

Whether you are new to farming, or a seasoned pro, one thing is for sure- partnering with an experienced accountant is a must. When it comes to questions you can ask your accountant, the list is endless. For this month’s article will tackle five of those questions. 

Are you well-versed in my industry?

This simple but vital question should be your stepping off point when establishing a relationship with you accountant. Every industry has unique financial and accounting related challenges and needs. Farming is no different. You want your accountant to know how to help you weather every high and low that agribusiness can bring. An accountant who knows the farming industry can help you grow your business, avoid financial downfalls, and identify beneficial opportunities for you such as tax credits, etc.  Accountants are not all cut from the same cloth. Going with the cheapest option or the professional located closest to you is generally not always the best route to take.… Continue reading

By Brian Ravencraft

Some of the most basic terms you will hear while interacting with an accountant may sound confusing to you. Not to worry, I understand. I thought I would use this month’s article to review some of the most commonly used accounting terms. Here it goes:

Accounting — the process of recording, assessing, and communicating financial transactions that helps individuals and organizations understand their financial health. Accountants do this work by keeping track of expenses, profits and losses, making use of this accounting formula: Assets = Liability+Equity. 

Assets — Assets help communicate how much your business is worth and are made up of items your business owns, as shown on your balance sheet. For example, land, buildings, cash in bank accounts are all assets. They are broadly two types of assets: current asset and fixed asset.

Liabilities — A liability is when someone owes someone else money.… Continue reading

By Brian Ravencraft

If your agribusiness or farming business ever goes through the audit process, you will have a chance to read the auditor’s report and their opinion. This is certainly unfamiliar territory for most folks. Let me walk you through the four different types of opinions that an auditor can conclude at the end of an audit. 

Unqualified: This type of opinion is often referred as a “clean” opinion. This is the most desired and most common opinion as it states that the entities financial statements are fairly presented and free of material misstatements.

 Qualified: This type of opinion is usually given when the auditor finds material misstatements in the entity’s financial statements. Even though the financial statements contained material misstatements those misstatements do not mis-lead the reader of the statements.

Adverse: This type of opinion is given if material misstatements are found, and those misstatements may mis-lead the reader of the statements.… Continue reading

By Brian Ravencraft

Growing financially is a top goal for any agribusiness. What many business owners don’t realize is that they have a tool that can readily use to help with their growth right at their fingertips. I am talking about your financial statements. They provide a glimpse into ways to use and shift funds to the benefit of your operation. 

Financial statements prepared by a CPA can help identify financial and operational deficiencies and uncover areas for cutting costs and generating revenue. Let’s take a closer look at what these statements are and what information you should be monitoring.

Which statements should you examine?

These statements include the balance sheet, income statement (which is also referred to as a profit and loss or P&L statement) and statement of cash flows. The balance sheet lists the business assets, liabilities and owner’s equity at any given point in time. Assets typically include cash, equipment, furniture, computers and other machinery, signage, and inventory.… Continue reading

By Brian Ravencraft

If you are looking to hire new team members for your farming/agribusiness operation, you should know that a valuable tax credit has been extended through 2025. This is a credit for employers that hire individuals from one or more targeted groups. This tax credit is known as the Work Opportunity Tax Credit (WOTC) and it presents a credit worth as much as $2,400 for each eligible employee. For certain veterans, the credit can be even higher — up to $4,800, $5,600 or $9,600, and for “long-term family assistance recipients,” the amount caps out at $9,000. 

Employees who qualify for the credit must begin working for the employer before Jan. 1, 2026. Again, these employees must come from a targeted group. Here is a listing of those groups: 

• Qualified veterans,

• Qualified ex-felons,

• Designated community residents,

• Vocational rehabilitation referrals,

• Qualified summer youth employees,

• Qualified members of families in the Supplemental Nutritional Assistance Program (SNAP),

• Qualified Supplemental Security Income recipients,

• Long-term family assistance recipients, and long-term unemployed individuals.… Continue reading