Farm and Finance

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

By Brian Ravencraft

Just how meticulous are you about keeping detailed records for the finances for your farm? Most folks I work with do a decent job, but when you kick it up a notch you can really see the benefits that excellent record keeping can provide.

Good record keeping starts with — but goes far beyond — tracking every dollar coming in and out of your operation. You should certainly be tracking where you are spending your dollars and where the dollars coming into your business are coming from. Be sure to keep all receipts and invoices and keep business and non-business expenses separate.

Reviewing and keeping your income statements and balance sheets is something you should be doing every month, all year long. Your income statement shows you your expenses and income over certain periods of time and your balance sheet lays out your liabilities, assets, and equity during at certain points in time as well.… Continue reading

By Brian Ravencraft

The various third-party payment apps that have become popular in recent years have changed the game for sure. They include PayPal, Venmo, and Cash App, just to name a few. We all use our favorite apps for different reasons, but moving forward, things won’t be as simple as pressing a button.

The IRS recently released a tax law requiring those conducting business on third party payment apps to report all transactions exceeding $600 in a calendar year. The new law went into effect on Jan. 1, 2022, so business owners need to be documenting those transactions carefully from this month on. Taxpayers who cross over the $600 mark using third-party apps for payment will receive a 1099-K form. From there, the taxpayer will be required to report the information to the IRS by a certain deadline.

Currently, reporting is only required if a payment was made in exchange for goods and services. This means, if you send your friend Venmo for the dinner tab they picked up, reporting is not required.… Continue reading

By Brian Ravencraft

A budget is vital for any business, no matter the size of industry. While the importance of it is well-known, some business owners try their hand at flying blind without one. This is almost always a terrible move. I asked some of H&M’s Business Services & Solutions Team to weigh in on why a business owner should absolutely have a budget in place and what can happen if they don’t. See their answers below. I love sharing advice with you from my colleagues from time to time as it gives you different insights to gather from. Here are their thoughts on budgeting.

Carmen George

A budget is all about planning. Without a budget, you won’t be able to gauge the financial health of your business. A budget helps you establish your goals and then reviewing it periodically will help you keep track of the progress. The process of making a budget alone is a great tool for your business.… Continue reading

By Brian Ravencraft

It is always important to be on guard when it comes to possible scams. However, this time of year you should have that guard up just a bit higher since scammers posing as the IRS are busier than ever. Scammers are becoming increasingly crafty in their ways it seems.  Here are a few examples of scams to be on the look out for according to the IRS. 

Signs of a scam

If you receive a call from someone claiming that they can suspend or cancel your SSN or they request funds from you in any form, you are almost certainly dealing with a scammer. The scammer is trying to scare people into returning voicemails and calls. Here are some things to keep in mind that the IRS will never do according to their website:

• Call to demand immediate payment using a specific payment method such as a gift card or wire transfer.

By Brian Ravencraft

You may have noticed that the IRS has been asking taxpayers if they had any transactions related to cryptocurrency, or virtual currency in recent years. On the first page of the 2020 IRS Form 1040, the IRS specifically asks “[a]t anytime during 2020, did you receive, sell, send, exchange, or otherwise acquire financial interest in any virtual currency?” Regardless of how you feel about whether this is an unwarranted intrusion into your private financial matters, the fact is that they want to know. To take it a step further, according to CNBC, they may already know as the IRS has issued summons to cryptocurrency exchange operators like Kraken, Circle and Coinbase to find out who has been engaged in cryptocurrency transactions.

It is important to know how the IRS views cryptocurrency. From their prospective, they view it as property that would be treated like purchasing a security. If you understand that purchasing or selling units of Bitcoin in the IRS’ view is much like purchasing or selling shares of Microsoft, Ford, or JPMorgan Chase, you have a basic understanding of the reporting they expect on your tax returns.… Continue reading

By Brian Ravencraft

Slowly but surely, we are seeing business owners return to entertaining clients and important contacts. With the return of sharing meals and outings, comes the need to be aware of the tax guidelines that come along with it. Let’s look at the most recent guidance. 

The IRS released Notice 2021-25 on April 8, which provides guidance on the temporary increase in the business-meal deduction from 50% to 100% for expenses paid or incurred after Dec. 31, 2020, and before Jan. 1, 2023.

Prior to Dec. 31, 2020, all business meals were 50% deductible if they were not considered lavish or extravagant and the taxpayer or an employee of the taxpayer were present. The notice released in April provides a temporary exception to the 50% limitation, indicating business meals can now be deducted at 100% if the food or beverage was provided by a restaurant. In this context, a restaurant is any business that prepares and sells food or beverages to retail customers for immediate consumption.… Continue reading

By Brian Ravencraft

QuickBooks continues to be a very popular accounting software choice for many agribusiness owners. Don’t get me wrong, those of you that work in this industry have many software choices at your disposal. In fact, my team and I are always learning about new ag-specific software to hit the market. However, QuickBooks remains an industry leader. Our team is often asked about time savings tricks that can be used within the software. I recently asked some of the top users of the software are our firm to share some of tricks with me for this article. I hope you find their tips to be useful. 

Utilizing the bank feed option in QuickBooks Online is a great tool for maintaining up to date information and reduce data-entry. Frequently matching transactions will help with month end reconciling. This will save you time if an item needs to be researched, you catch it early and don’t put yourself in a time crunch later on.… Continue reading

By Brian Ravencraft

When it comes to keeping track of the revenue coming into your agribusiness, and the expenses you take on during day-to-day operations, you essentially have two different types of accounting methods to choose from. Cash accounting and accrual accounting. It is important to understand the difference between the two before deciding what is best for your agribusiness.

Cash accounting looks at the revenue and expenses as they come in and as they are paid out. Think of this as a wheel that is constantly turning as money flows into your operation. Not considered while using this method is money that is expected to come in. Here we are talking about all real cash, all the time. Those who enjoy a real time look of the cash coming in and out of their business should select this method. 

Accrual accounting brings accounts payables and receivables into the fold, monitoring the money brought into the agribusiness and the funds and services the operation owes to outside vendors and companies.… Continue reading

By Brian Ravencraft

When it comes to what business structure is right for your new or next business venture, you have several options to choose from. Making the right decision can help you with everything from being profitable and poised for growth to staying tax compliant. This month, I will break down some of the most popular business structures for you. These aren’t the end all be all when it comes to paths you can take, but these ones tend to lead the pack.

Sole proprietorship 

This is the option you will see many single workers select. Think of freelancers or those who consult with many different entities.  It takes little set up effort to become a sole proprietor, but this is truly a one-man-band type of situation. Whatever the business owes, falls solely to you.

 Limited liability company 

Also known as an LLC, this structure option has really been having its day in the sun in recent years.… Continue reading

By Brian Ravencraft

It can be challenging for farmers to not micromanage their employees, whether they are members of the family or not. But there comes a time when overmanaging can become a detriment to the employees, the family and the farm. If this is happening to you, it is better to evaluate it now instead of waiting for the situation to improve on its own. 

It can be hard to know if your employees truly feel micromanaged. Often times, they won’t speak up about it. So, it is up to you to look for trends that may bring their feelings to light. Do you find yourself needing to be involved in every issue that goes into your operation? Do you feel the need to have your employees run everything by you? Does every small detail need your approval? Do you find your employees to be buried in addressing those smaller matters, keeping them from working on larger revenue driving exercises?… Continue reading

By Brian Ravencraft

In this installment I will talk about petty cash and the best practices for having and using it. Petty cash is defined as a small amount of discretionary cash funds used for expenditures where it is not sensible to write a check because of convenience and the cost of writing, signing, and cashing the check. So, while petty cash is usually not a large amount of money, it can be stolen, abused, and used in a careless manner. To avoid this, it is best to have some rules for handling it.

• Set a reasonable amount for petty cash. Estimate how much you would need to cover small office expenses for about a month. You want the amount to be as small as possible, without having to replenish too often.
• Have a set of rules on how petty cash can be spent. Put the policy in writing and give some good examples of what petty cash can be used for — making change, small office supplies, postage, etc.

By Brian Ravencraft

I am pretty sure I have mentioned before that I have a farming background. A handful of the team members I work with at Holbrook & Manter do as well. From growing up on farms, to managing them to this day, we truly understand the challenges those working in agribusiness face. For this article, I asked a few of my colleagues to share their thoughts on top accounting services those in farming and agribusiness should seek out, and why. First, I will share my thoughts just below, then read on for their thoughts we well. 

The top agribusiness accounting service needs I see are the following:

1. Estate/retirement/ transition planning: Farmers approach this topic differently over other retirees. Retirement planning for farmers can look very different from retirement planning for others that have worked in just an employee setting. Typically, retiring farmers rely on a combination of income from farm assets, savings, and social security.

By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs

I usually stay clear of highly charged political topics, but I believe this one is worth mentioning. What I am about to explain has not been introduced to Congress (and timetable is uncertain), but the topic is part of President Biden’s tax plan.

Up to this point and with changes made back in 2017 tax legislation, very few people end up paying estate taxes, or even having to worry about it at all. With President Biden’s tax plan, however, a potential and massive change in how estate taxes are calculated could be on the horizon.

Biden’s plan could leave you paying higher income taxes after death by repealing present law’s step-up in basis that increases the tax basis for inherited assets to their full fair market value upon death. This proposed rule — which “carries over” an asset’s tax basis to the heir — likely would entail a significantly greater overall tax burden with respect to transferred assets than would the decreased exemption.… Continue reading

By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs

We see it often — business owners using Excel to track the finances related to their operation. While it’s true that Excel is very sophisticated and most users know enough to be dangerous while maneuvering through the software, you simply can’t erase the chance for human error. Spreadsheets are just prone to them due to the amount of manual data entry that is required. A formula can be set up in correctly, the copy and paste feature may not pull through the correct cells and if one cell is modified, it can throw off the entire spreadsheet. When these things happen, it causes unnecessary headaches for the business owner, which we hate to see happen.

We encourage the business owners we work with to make the switch to accounting software such as QuickBooks (but there are many options out there).… Continue reading

By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs

Possibly selling your business is not the only reason to have a business valuation performed. There are several scenarios that call for a thorough review of your business’ worth. I have been performing this service for clients for many years, for many different reasons. Yes, if you are preparing to sell your business, a valuation will provide you with the numbers you need to a secure a deal that benefits both you and the new owner. But that is just one reason.

You will need to know the fair-market value of your operation in the event that you consider merging with another entity. Or you will need to be armed with the right numbers if you plan to add a new owner to the business so you can set the buy-in amount for him/her. The same goes for owners and other shareholders that will be exiting the business.… Continue reading