For years farmers have been reporting financial information on a variety of forms for various reasons. Effective management of a farming operation today requires that records be kept so managers can make informed decisions affecting the profitability of their farms.
Some lending institutions require detailed business and personal information on everything a farmer owns, as well as the status of unpaid loans. They may also require production records and an estimate of expected sales and expenses for the next year. Increasingly, regulations point toward the keeping of chemical application records and soil and water conservation plans for environmental concerns. The Internal Revenue Service (IRS) requires farmers to report cash sales, expenses, depreciation and information on government program participation.
Farm records are often maintained only for IRS filing purposes. While tax records are necessary, additional information may be needed for informed management decisions. Farm business decisions that are not based on accurate farm records may lead to less profit. The efficient management of a farm operation requires sound record-keeping and record analysis.
"PB1540 Establishing and Using a Farm Financial Record-Keeping System," The University of Tennessee Agricultural Extension Service, PB1536-2M-5/95 E12-2015-00-249-95, https://trace.tennessee.edu/utk_agexfinman/1