Starting Strong: Farm Accounting for Beginners

Congratulations! Getting your farm or ranch operation up and running is a huge milestone. Whether you're raising cattle, growing vegetables, or managing a mixed operation, we know how much time, energy, and love it takes to build a working farm business.

But passion alone isn’t enough—your farm or ranch needs to be treated like a business to survive and thrive. One of the most important tools to get right from the start? Farm accounting.

In this blog, we’ll walk you through the basics of farm accounting using a step-by-step approach. You’ll learn why accounting software like FarmRaise can be a game-changer for your operation. Let’s dive in!

What is Farm Accounting?

Farm accounting means keeping track of all the money that comes in and goes out of your farm operation. That includes your gross income, farm expenses, farm assets, and any liabilities like loans or a line of credit.

It’s how you track your financial performance, create financial statements, and prepare for your income tax. The goal? To understand your farm’s financial health and make smarter decisions.

Good farm accounting helps you with:

• Applying for loans from lenders
• Filing your tax return (especially Schedule F)
• Managing depreciation expense
• Showing your net income to potential partners or cooperatives
• Monitoring cash flow, accounts receivable, and payable items

Step-by-Step: Getting Started

1. Build Your Recordkeeping System

The first step in farm accounting is recordkeeping. That means collecting receipts, tracking expenditures, and noting when you sell or purchase agricultural products or equipment.

Use a recordkeeping system that works for you. Some farmers start with a notebook or spreadsheet, but most grow into using accounting software. FarmRaise, for example, is designed specifically for farmers and ranchers—not city-based businesses.

2. Set Up Your Chart of Accounts

Your chart of accounts is like a big filing cabinet that organizes all your farm transactions. Common categories include:

• Farm income (like crop sales, livestock sales, custom work)
• Farm expenses (feed, fuel, repairs, wages)
• Real estate purchases or resale income
• Liabilities (equipment loans, mortgages)
• Depreciation and depreciation expense

With software like FarmRaise, you can set this up easily without needing to be an accountant.

3. Choose Your Accounting Method

There are two main accounting methods:

• Cash accounting: You record income and expenses when money changes hands. Simple and easy.
• Accrual accounting: You record things when they happen, even if money hasn’t moved yet (e.g. feed bought on credit card). This gives a more accurate picture of your financial performance.

Most beginning farmers use cash accounting, but some switch to accrual as their farm grows.

4. Schedule Regular Bookkeeping

Bookkeeping isn’t a once-a-year task. To stay ahead, follow this guide:

• Daily: Snap photos of receipts or log transactions in your app
• Weekly: Review your income and expenses
• Monthly: Reconcile your accounts receivable, update financial records, and check your cash flow
• Quarterly: Review your income statement, cash flow statement, and balance sheet
• Year-end: Get ready for your tax return, update valuation of your farm assets, and review your short-term and long-term goals

Why Use FarmRaise Accounting Software?

You may have heard of QuickBooks, but that system is built for urban small businesses—not agriculture.

FarmRaise Accounting Software is different. It’s built by farm finance experts and tested by real farmers. Here's why it's great for beginners:

• Simple onboarding: Get set up in minutes, not hours.
• Farm-specific tools: From Schedule F reports to depreciation tracking, we’ve got you covered.
• Tax prep made easy: Organize your data for the IRS with confidence.
• Cash flow clarity: Know where your money is going so you can plan and invest wisely.
• Year-end reporting: Prep your financial statements for lenders or the IRS in just a few clicks.

Key Terms Every Farmer Should Know

Here’s a breakdown of some important words you’ll come across:

• Cash Flow: The movement of money in and out of your farm business. Staying positive here is key to paying bills and expanding your farm.
• Depreciation: The loss of value of your farm assets over time. The IRS lets you claim depreciation expense to lower your taxable income.
• Income Statement: Shows how much money you made versus how much you spent—your net income.
• Balance Sheet: A snapshot of what you own (assets), owe (liabilities), and what’s left (equity).
• Schedule F: A special tax form for farmers to report farm income and farm expenses.
• Valuation: Estimating the market value of your assets, land, or inventory.
• Tax Credits: Programs that lower the amount of income tax you owe.
• Chart of Accounts: Categories that keep your books neat and tidy.
• Allocation: Assigning a percentage of costs or income to different parts of your farm production.
• Liquidity: How quickly you can turn assets into cash. Essential for covering emergencies or repayment.

How Good Accounting Helps with Decision-Making

Better numbers mean better choices.

With accurate reports from FarmRaise, you’ll be able to:

• Spot rising expenditures
• Know your true gross income
• Make plans for distribution or repayment
• Prove your value to lenders
• Maximize tax credits and deductions
• Understand the useful life of new equipment

You’ll also be able to track accounts receivable, organize distributions, and see if your farm management decisions are paying off.

Final Thoughts: Start Smart, Stay Strong

Learning farm accounting might feel overwhelming, but you don’t have to go it alone.

With FarmRaise Accounting Software, ranchers and farmers alike can simplify their bookkeeping, stay compliant with the IRS, and gain control over their financial records—without spending hours every week on paperwork.

Remember, your love for farming is your “why.” Farm accounting is your “how.” Let FarmRaise give you the tools to build a strong and successful farm operation for years to come.

Ready to get started? Sign up for FarmRaise today and start building a better future for your farm. Use code IT312B at checkout for 20% off or use this link to checkout now.