Luke Skywalker - 12/1/2024 12:41

... If I Tell Myself Enough Lies.

I have two topics for you to research...

1. Accrual Accounting.  Regardless of how much money you spend at the end of the financial year to minimize/zero taxes, by putting a value on inventory and pushing pre-paid expenses off into the year they are actually used, then one gets a true picture of the financial health of an operation for the year.

2. Enterprise Analysis - This is where you do your best to sort out the revenue and expenses from each enterprise so that you can make good decisions. For example, are you "giving feed" from the row crop operation to the livestock enterprise "at cost" so that it appears the livestock is generating profit? The row crop side "sells" the feed to the livestock enterprise at full market value (otherwise called opportunity cost) so that you can evaluate whether the cattle are financing the rent paid for row crops, or whether the row crop operation needs to sell the grain to the market and the cow herd liquidated. Also, on the cost side, a tractor used for both enterprises needs to have a cost allocated based on the use for each. Maybe 30% of hours for row crops, 70 for livestock, then run the numbers. 

If your partner is unable, or unwilling to engage in either of these exercises, you will both run along blindly until either 1. there's a bundle of money in the bank account that he doesn't really know how it got there, but feels secure to quit the day job, or 2. gets ticked off at his day job and "quits to go farming full time" and now your single off-farm income is subsidizing an operation that could be (and maybe has been) circling the drain. 

Also, and has been mentioned in other posts to this thread... you need to do crop budgets and livestock budgets. Too many calves bought not because there's a profit opportunity, but because "if we don't, we'll have to pay tax". If you want to work in town forever, and never have the opportunity to work on a self-supporting farm, keep doing what you're doing.

From the Cheap Seats.
Luke

Edit for clarity.