At a minimum your farm will need a record keeping system for tax and legal compliance and it is highly recommended that you also keep yield and other farm production records that might be useful to making decisions on the farm. For example, many growers keep weather logs so that they can evaluate their practices and yields and then make better growing practice and crop variety decisions for the coming year. Many tools are available as part of the Improving Profitability tutorial on the Northeast Beginning Farmer website at https://nebeginningfarmers.org/farmers/achieving-profitability/profitability-tutorial/.
Many small and beginning farmers and businesses use the shoebox method of accounting. Keep all sales receipts in one folder, expense receipts in another, maintain a capital asset depreciation log, and you may have additional folders for farm yield or other data important to the year. The advantage of this system is that it is simple and easy to do. The disadvantage is that the data is not well organized so when you need farm information you often have to sort through piles of paper and do all computations by hand.
Cornell Farm Account Book
Though geared more toward rural farmers, the Cornell Farm Account Book can be a helpful tool for organizing your finances. The advantage of the farm account book is that it is easy to understand and the information is well laid out in case you need to access it later. The disadvantage is that the information may not be laid out how you as a manager would like it, and it is still a hand-entry accounting system so entering farm information may take several hours per week. To order the Cornell Farm Account Book ($20) or the Cornell Classic Farm Account Book ($15) from CUP Services, write P.O. Box 6525 Ithaca NY 14850, call 800-666-2211, or e-mail email@example.com.
If you can use a basic spreadsheet in Excel or a similar program, this is a good compromise between paper systems and more sophisticated recordkeeping program. If you don’t need to generate invoices and have a relatively simple, small operation, a spreadsheet like this may serve your needs well for many years.
Farm Records Service
Some farmers choose to mail all invoices to an accounting service where the accountant will enter the information into a computer records system, provide you with detailed monthly business statements, and perform all tax functions.
The advantage of this system is that it provides a person who does not have the time, understanding of accounting or computer skills the highest level of records information. The disadvantage is that this system has the highest cost and the monthly business statements take a few weeks to process and get back whereas the person utilizing an on-farm computer records system will have those statements in real time.