Alabama A&M University
S M A L L FA R M S R E S E A R C H C E N T E R
FA C T S H E E T
COLLEGE OF
AGRICULTURAL, LIFE
AND NATURAL SCIENCES
United States Department of Agriculture
Office of Advocacy and Outreach (OAO)
Farm Record Keeping
Accurate and up-to-date records are essential to successful farm management. Before any
financial analysis, budgeting, or financial decisions can be made farm records must be
maintained. Managers usually keep farm records for three reasons:

Legal requirements - such as income tax purposes.

Obtaining credit - such as filling out loan applications.

Management tool - such as planning and budgeting.
It is surprising to see the number of farms that have little or no record keeping system. Reasons given for this include, "I don't have time", or "I don't need to bother". Some farmers
simply save up all their receipts and at year end, carry it all off to their accountant. Therefore, there is no accurate measure of profitability or production costs until months after the
fiscal year ends when the accountant prepares financial statements. Most farmers do keep
records but primarily for the first two reasons stated above, and not as a management tool.
However, records should also be used to:

Evaluate past performance of the operation,

Provide a financial picture of the present situation, and

Serve as a planning guide for future decisions.
A record keeping system should go beyond the basic listing of income and expenses; it
should be used to prepare the following:

An income and expense statement which reflects the profitability of the farm. This is
more accurately done using an accrual statement, which further accounts for inventory, accounts payable, and receivables, as well as depreciation expense.

A balance sheet or net worth statement which is a listing of all assets and liabilities of
the operation. This reports the financial strength and progress of the business.

A cash flow which provides either a monthly or quarterly listing of all inflow and outflow of money from a business. It shows possible shortfalls in cash and thus allows for
corrective measures. Unfortunately, this is usually the most neglected management
tool.
Beyond financial record keeping is production record keeping. Essential areas include
breeding, feeding, harvesting, and field records. The less accurate your production records,
the less accurate your financial projections will be. Once these records and statements are
available, proper analysis can then be carried out.
Small Farms Research
Center
Alabama A&M University
4900 Meridian Street
James I. Dawson Building
RM #219
P.O. Box 700
Normal, AL 35762
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Compare past records to the present and look for progress in the business.

Examine areas where costs have risen and consider how they could be lowered.

Compare volume of product and cost of production.

Look at level of debt repayment
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
Is financing required?

What is your most cost efficient crop or livestock enterprise?

Where have problems occurred in the past and where will they likely occur in the future?
This is what planning is all about, reviewing past performance and using the knowledge gained to make future endeavors easier and more successful. All of this analysis and more can be obtained with proper record keeping, but
it has to start with accurate and up to date records. Record keeping is but one step in successful farm management.
If you feel that your present system is not able to cover the areas listed above then take the step to expand and improve upon it.
Author: Duncan M. Chembezi, Ph.D. Professor and Director, Small Farms Research Center , Alabama A&M
University
Small Farms Research Center, Alabama A&M University
4900 Meridian Street
James I. Dawson Building, Room 219
Normal, AL
35762
Small Farms Research Center Background. The Small Farms Research
Center was developed to assist small farmers with limited resources in Alabama’s underserved communities. The center was first developed in 2000 to
assist minorities, especially women, African Americans and underserved individuals improve their farm management practices, given ones condition and
resources. The mission of the Center and the Small Farmers Outreach program
is to assist all small and limited resources farms effectively deal with risk management and food safety issues and provide them with informational sessions.
The Center has also expanded its outreach efforts to meet the needs of entrepreneurs and businessman. The center is located at Alabama A&M University
in the Dawson Building. The center specializes in following areas
Marketing and Business Plans
-Record keeping and Loan Application
-Identify alternative enterprises
-Personal Management
-Legal Issues
-Finances
-International Business and Procurement
-Accounting Issues
-Taxes
-Business Development
-Conducting seminars on Government programs and other issues
For more information about us give us a call at (256) 372-4970 and 1-866858-4970.
Website: www.aamu.edu/smallfarmers
Cooperating Units: USDA Office of Advocacy and Outreach (OAO), USDA/NIFA/ Beginning Farmers and Ranchers
Development Program (BFRDP), USDA/OAO/Outreach Assistance for Socially Disadvantaged Farmers and
Ranchers (OASDFR) Program, Alabama Cooperative Extension Systems, and Alabama A&M University.
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