The following information on book keeping and planning for the small farm comes from Five Acres and Independence by M. G. Kains. Five Acres and Independence is also available to purchase in print.
Every farmer seeks to make his farm pay, to gain more than a mere living, to enjoy the comforts of life and to provide for old age. To do all this demands careful planning months and often years in advance of marketing. At the opening of each season the farmer who plans a production program may feel that he has planned well but at the close of the year may find that he has erred, or that growing conditions were unfavorable. High prices at planting and breeding time usually prove a poor guide when planning the operations for the following season.
Crops to grow, area to plant, live stock and how much to keep are problems which demand knowledge of market requirements and conditions, when the produce is to be sold, the advantages and disadvantages of various competing regions, knowledge of price trends and the potential production of the individual farm. Most farm products are supplied by many farmers working independently and competing with one another in the market. Usually the keenest competition does not come from producers in other districts but from the neighbors.
Each farmer, therefore, should know what these competitors are planning to do. He should learn to utilize the facilities created by agricultural experiment stations and the Department of Agriculture as to the combination of the various crop and live-stock enterprises and economic conditions. These unbiased agencies strive to give true information concerning the leading farm enterprises to enable farmers to plan their work intelligently with respect to market demands, changing economic conditions and probable price trends at the time when sales are planned to be made. Information is available through diverse publications and state, county and community channels. The county agricultural agent will also supply information.
More important still, every farmer should know the truth about his own farm business, be able to plan production programs and adjust his program to meet changing economic conditions. He who discovers his less economical and productive methods and either corrects or discards them usually makes his farm pay better than before. Keeping records is the most effective way by which to determine the truth about himself and his business, his less economical and less productive methods, practices, crops and live stock.
Of primary importance in these respects is an annual farm inventory, for the following reasons:
1. It shows the net worth or total value of all property above liabilities and tells whether or not the enterprise is being run at a profit or a loss, and how much. 2. It shows how the total investment is apportioned among the diverse branches of the business. 3. As cash on hand, taken alone, is not a safe guide as to earnings, an inventory prevents drawing false conclusions as to prosperity at the close of the year. Often a comparatively small amount of cash discourages a farmer who has done well but whose earnings are tied up in some kind of property. Conversely, a large amount of cash on hand may have come from a decrease in inventory of other property. 4. An inventory kept up to date enhances credit relations with banks and other loaning concerns when money must be borrowed to carry on the business. 5. Should adjustment be necessary after a fire, it is highly valuable. 6. It is fundamental to the keeping of any accounting system.
Farm accounts reveal the less productive, less economical methods and practices and where income may be augmented; but they are of little or no value unless analyzed and the results studied. Among important items they should show the following facts: 1. Net earnings the farmer pays himself for his labor and management. 2. Gross income or total amount received on sales of crops, live stock and live stock products and increases in inventories each year. 3. Volume and increase in business as a whole and from each department—live stock and individual crops. 4. Total operating expenses. 5. Cost per $100 of income from each department as a check upon expense control. 6. Total live stock. 7. Productive animal units per area or the proportion of stocking to the land stocked. 8. Acres pastured per animal unit or the economy of pasturage. 9. Receipts from stock departments. 10. Receipts per unit whether animal or crop, as a check upon the quality of product. Low returns per unit indicate that quality is below par.
11. Records of how well horse, tractor and man labor are being used. 12. Productive labor, or the average number of hours—horse, tractor and man—necessary to manage each crop and class of live stock annually. 13. Total number of available days’ labor annually. 14. Use of man labor compared with available days’ labor to care for each crop and class of live stock. 15. Number of men needed annually to run the farm. 16. Crop-acres per man or number of acres grown per man. 17. Productive animal units per man, or number of head per man. 18. Crop-acres per horse. 19. Days of productive horse-labor to care for each crop and department of live stock. 20. Days of work, per horse or tractor each year. 21. After the record has been analyzed the less economical and less productive methods and practices may be studied, amended, or replaced by better ones, and what can and can not be done to improve conditions may then be considered.
Every farmer should have his account book, take inventories, keep records of receipts and expenses as suggested and thus increase his income.
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