Financial Checklist for Ag Operations

The beginning of the year is a great time to perform an overall financial check for your business.

“We recommend that farm operations do this annually,” says principal Brad Palen of Pinion. “Not only does it provide you with a clearer picture of your business’ progress for the year, but it can also potentially find late-season opportunities to save or make money. You might even spot ways to minimize your tax obligations.”

 Gearing Up Your Ag Business for 2024: Checklist

“As a CPA, I hope you address every one of these items. But completing even one or two will provide a clearer picture for the year ahead. More importantly, you might detect issues that can prevent small problems from escalating into big ones,” Palen adds.

1. Know your numbers. Make sure your accounting records are in line. Confirm that your loans agree with your bank balances. Do your year-to-date revenues and expenses line up with your budget? What changed and why?
2. Gather all documents for the fixed-asset purchases you’ve made this year. Send them to your accountant to update your depreciation schedule.
3. Reconcile all your bank accounts. Know what your balances are on operating or vendor loans. Is there enough to pay expenses for the rest of the year?
4. Review any grain-sales contracts. See if you can defer any payments to next year.
5. Identify what kind of crop insurance you have. Check whether there’s opportunity to defer any proceeds.
6. Assess your inventory and review all costs associated with it. Be aware that feed costs are tax-deductible.
7. Examine your crop results. Did yields meet your expectations? It’s a good time to communicate with your agronomist about what worked and what didn’t.
8. Plan out machinery and equipment repairs so they’re completed before planting rolls around next spring.
9. Review any rental or lease agreements. There may be opportunity for positive gains. If you have a landlord or crop-share arrangement, make sure you have the information you need to split expenses or to pay your share of revenues.
10. Speak with your accountant about any opportunities to better align existing debt structure and enhance working capital.
11. Go over your employee benefits package, including any potential bonuses and 401(k) contributions. This will be especially helpful in preparing you for employee performance reviews.
12. Set up a 2024 strategic planning meeting with your board of directors and trusted advisors. Once you’ve developed a plan, relay it to your key managers to help execute it.
13. Re-evaluate your 2023 risk management plan. Will it stay the same or change for the coming year?
14. Begin developing a full farm budget for 2024. Provide details for each crop. Include all expenses. Don’t leave out an expense just because you think it’s a personal item. Including those costs will ensure a way can be found to pay for them.
15. Communicate your plans and budgets to your tax advisor. The more he or she knows, the better they can help you with tax-planning advice. 
16. Reassess your tax strategy in coordination with expected changes to tax codes.  Major provisions under the Tax Cuts and Jobs Act of 2017 are set to expire by the end of 2025. 

• • • Estate and gift taxes legislation is sunsetting in 2025.

    • Bonus depreciation – The TCJA enacted 100% bonus depreciation, allowing businesses to immediately write off 100% of the cost of eligible property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. The 100% write-off expired Dec. 31, 2022. Unless the law changes, the bonus percentage will decrease by 20 points each year before expiring completely.

• • • Individual income tax rates – the TCJA lowered tax rates across the board and restructured bracket spans. Barring action from Congress, income-tax brackets will revert to their higher pre-2017 levels.

• • • Standard deduction – The TCJA significantly increased the standard deduction.

• • • Limitation on deduction for state and local taxes – The TCJA capped the state and local tax (SALT) deduction at $10,000 per year, consisting of property taxes plus state income or sales taxes. Before the TCJA, there was no cap to the value of the SALT deduction.

• • • Qualified business income deduction – The TCJA allows non-corporate taxpayers to deduct up to 20% of their qualified business income.

These financial checks can help you decide how to proceed and succeed in 2024. Contact a Pinion food and ag advisor if you need help with financial management, tax and accounting, or risk management decisions.