According to Omagh-based accountant, Seamus McCaffrey, accurate record keeping has always been an important aspect of farm management.
However, in the current volatile business climate, it is a facet of farm planning that has become of critical significance.
This is particularly so given the growing pressure on farm businesses to accurately monitor every aspect of performance.
The pending introductions of carbon targets across agriculture as a whole, represent a case in point.
McCaffrey commented: “Firstly, farm family members need to know throughout the year the financial performance of each enterprise on the farm.
“It is necessary to know both actual costs and the trends of costs and income.
“This is the only way that the farm can manage its banking facilities and to know, as early as possible, if a discussion is required with the bank, in order to maintain a positive business relationship with no surprises.”
McCaffrey added that from a tax point of view, up-to-date record keeping and the preparation of year to-date figures enable an informed conversation to be held with the accountant.
“This discussion, informed by year to-date profit and loss information enables a good estimate of the projected tax liability for the current year,” he continued.
“This exercise will lead to a discussion of tax planning opportunities which may be able to be implemented before the end of the current tax year.”
Examples of such opportunities include wage to family members working on the farm; training allowance for a daughter or son attending a third level course directly related to parents’ trade; profit averaging for sole traders or partners in a partnership; incurring necessary repairs or capital expenditure.
Record keeping
Up-to-date record keeping facilitates succession planning in that profit trends and cash surpluses and deficits are highlighted, according to the accountant.
“This is valuable information to enable the next generation to be informed,” McCaffrey continued.
“An accurate and up-to-date record keeping system gives confidence to the next generation joining the business to the effect that official tax-related enquires can be effectively handled.
“The increasing demands of farm quality assurance standards coupled with carbon audits, soil sampling and animal health and welfare make up-to-date record keeping a necessity to ensure farm sustainability.
“There are many book-keeping and record keeping options available. A discussion with the farmer’s accountant will assist in making the appropriate choice,” he concluded.
