Do you track your accounts payable and receivable, or only your cash balances? Do you have a solid understanding of your cash flow? Do you keep a close eye on your balance sheet?
Each of these management tools are an important piece of a business’s record-keeping strategy, and solid records are key to business success. Beyond tax compliance, a solid record-keeping strategy can reveal ways your business can become more profitable.
Keeping a close eye on your records is about a lot more than just ensuring you have money in the checkbook at month’s end. It’s about knowing that your business is headed in the right direction. It’s about understanding your cost of production to ensure that you’re receiving a fair price for the products you produce. And it’s important as you plan for the future of your business. You’ll be better positioned to take advantage of potential growth opportunities if you have a strong understanding of your business’s current financial position.
In some case, good records can have a substantial impact on profitability. If you’re accustomed to tracking cash only, but not considering overall accounts payable and receivable, you may be missing out on opportunities to boost profits by adjusting vendor payment frequency, sales terms or using other financial strategies.
Comprehensive records will allow you to review trends, which may reveal, for example, that switching vendors or service providers can save money and increase profits. Sometimes only watching cash balances can allow opportunities like these to slip by, since cash on hand doesn’t always correlate to profits. Tracking total assets and liabilities, including accounts payable and accounts receivable, can help reveal areas where you can streamline your operation and increase profitability.
How in-depth you keep your records is a matter of personal preference and record-keeping services, like Farm Credit East’s Financial Record-keeping program, are typically custom-tailored to each operation depending on each individual producer’s needs.
Farm Credit East’s Financial Record-keeping program offers mail-in services or on-farm accounting for important income and expense information, allowing our experts to prepare tax and financial reports. Our CenterPoint accounting software helps track critical financial data and provides reporting for key variables like payroll, balance sheets, management reports, invoices, payables and receivables. Ongoing, customizable software support helps ensure your records stay up-to-date.
Learn more about getting started with Farm Credit East’s Financial Record-keeping program here.