Those who don’t actually farm, or ranch often harp on needing to know your cost of production, but rarely provide solutions beyond “good records” to help calculate this ever-changing number. The challenge with developing a true cost of production is that expenses for farms and ranches often span multiple years. Reports in accounting software often utilize the calendar year as a boundary that must be overcome. To surmount this boundary in Quicken, using a multiple tag system is recommended. The multiple tag system, at minimum, identifies the commodity, the year the commodity is produced and the year when livestock is born.
Tags can help you glean this information from your Quicken file without complicating your category list. Unlike categories, tags are not associated with a tax line item. Tags are similar to categories, allowing you to easily sort transactions. Transactions can be given both categories and tags. In fact, each transaction can have multiple tags and can even be split by tags. Reports filtered by tag are more specific than reports filtered by category. To read more about the basics of tags click here.
To illustrate this point, we will consider the following example: A corn farmer pre-pays for chemicals in 2019 that will be used for the 2020 crop. During the 2020 growing season, they will accrue additional expenses for the 2019, 2020 and 2021 crop. Finally, in 2021, the last expenses for the 2020 crop are incurred and the corn is sold.
If the farmer only tags each transaction by the commodity, as shown in table 1, they are neglecting to realize that expense and income of producing a single crop may span many years. This system would allow them to know how much was spent and earned on corn production in 2020, but not specifically for the 2020 corn crop.
By using at least two tags, as illustrated in table 2, a report could be created for 2020 corn. Expenses and revenue could be attributed to the proper crop year, despite the date of the transaction. To identify a transaction with multiple tags, simply separate each tag by a colon (:).
|12/31/2019||Chemical Supplier||2020: corn|
|2/1/2020||Seed Dealer||2020: corn|
|12/14/2020||Chemical Supplier||2021: corn|
At this point you may be wondering, why not use a single tag, “Corn 2020?” This would produce the same result but may offer less flexibility.
When you have followed a crop through its entire lifecycle, from the first expense to its final expense, you will then be able to calculate its true cost of production.
It is important to note that production records such as quantity produced are difficult to track in Quicken. It is recommended that you utilize the memo feature or an additional program such as Excel to record these details.
If you need more help with Quicken for your farm or ranch, check out our free “Quicken for Farm and Ranch Record Keeping,” self-paced video course that teaches the basics of Quicken. The course focuses on the record-keeping needs of farmers and ranchers. Participants will learn how to input transactions, use categories, tags and memos, and run common reports. Quicken files can also be exported to QuickBooks and Excel.
The workshop is free, but registration is required at go.unl.edu/quicken.