Plan Now for a More Profitable 2023

Source: Noble Research Institute

If you’ve been waiting for a sign it’s time to deal with the shoebox of receipts piled in the corner of your office or shop or on the kitchen table … this is it.

Dan Childs and Jason Bradley, two agriculture economic consultants at the Noble Research Institute, say that to end your financial year well, most of the work should already be done.

“Don’t wait until the end the year to cram it all in,” Bradley says.

To make the most of your end-of-year tax consultation meeting, be prepared with updated income/expense records, then use this final month of the year to reflect, recalibrate and look toward a more regenerative future on your farm or ranch.

These three financial statements are the building blocks for successful financial strategies.

1. REVIEW YOUR PROFIT AND LOSS STATEMENT; MANAGE FOR TAXABLE INCOME

Take stock of your income and expense reports in December and prepare to have a thoughtful conversation with your accountant concerning any additional expenses or income you anticipate in the financial year. Evaluate your taxable income so far, and make a plan to adjust accordingly.

Your profit/loss statement, also known as an income statement or statement of earnings, tracks basic revenue and expenses over a specific time period, typically a fiscal year.

If you’re a new producer or are in the process of transitioning your operation toward a more regenerative model, make an honest evaluation of what kinds of tax implications those changes might have.

Are you shifting a calving season to sync more closely with resource needs? Moving from a year-round herd to custom grazing? Need to purchase a no-till drill? Now is the time to identify those production goals and changes and decide how they will impact your income and cash flow. Do you need to stock up on cover crop seed now? Sell old drills to release capital for reallocation to new equipment?

Only a tax professional can offer the kind of legal guidance you might need in these decisions. Remember, tax codes may change from year to year, so be sure your decisions are in line with the most current requirements.

2. REVIEW NET WORTH STATEMENTS; SET OPERATIONAL GOALS FOR THE FUTURE

Tracking profit and loss is the baseline for