Farming is not just a business, but also a way of life.
In Metro Davao alone, about 40% of the region’s total employment is absorbed by the agriculture sector. Further, agriculture accounts for roughly 43% of the city’s economy, thus making it the largest economic sector in the city, trailed not so closely by the commercial and service sectors, and by the industrial sector at 35% and 16%, respectively. With a total land area generally classified as timberland or forest, it is no doubt that the city’s growing economy can be largely attributed to its stable agricultural grid.
Agriculture is a specialist sector with unique practices and conventions, making it unlike other commercial enterprises. But still, what keeps it running is largely dependent on its business function. And so, just like many other business categories, agricultural ACCOUNTING is necessary.
Accounting for agriculture, farming, or other rural-based business is a specialist area that requires expertise and understanding of the industry. In Davao, there are many Certified Public Accountants (CPA) and/or accounting firms who fully understand the flow of this economy.
But if you’re among the many small-scale farmers in Davao, a CPA with experience in agricultural affairs is enough as long as he/she is able to closely work with you in making the most of your tax planning opportunities and tax liabilities reduction process.
Agriculture tends to be capital intensive, so the approach to the business structure is important. Hiring a reputable CPA for your agricultural business is essential but should therefore be circumspectly considered.
Hence, your CPA must be able to deliver the following tasks with precise expertise, professionalism, and commiseration for your farm/agriculture business:
Farming enterprises are often in need of proactive advices in relation to business structures and tax planning. For many beginners in the agricultural industry, receiving business planning advices is an advantage. Today, modern technologies can already be easily morphed with the traditional farming industries. CPAs can give a comprehensive analysis of the financial advantages and disadvantages of these technologies e.g. using solar energy for farming and urban gardening.
Probably the most important part of running a business is recordkeeping, but it is often the most ignored part. Here are the advantages of keeping farm accounts and records:
- Good bookkeeping allows the agricultural businessman to: know his business’ financial status, know his gains and losses over time, know which investments/expenditures have gone unproductive, and develop rational long and short term plans. With the help of his accountant or CPA in analyzing these records, there lie bigger chances ON INCREASING HIS INCOME.
- His managerial skills are improved. Along the process, the businessman inevitably acquires business habits which can be helpful when solving future problems. He gets a better insight into the process of his business by finding out the defects and figuring out how to fix them.
- Well-kept accounts and records are essential when applying for loans. Especially for agricultural expansion endeavors, lending corporations will most likely sanction loans easily to applicants who have completely filled-out books of accounts.
For farmers, VAT Return services from a Certified CPA are highly useful. An application for VAT returns means an application for the refund of VAT from a farmer who is not registered for VAT. Claims can be made on fixed items such as concrete, fencing, sheds, land drainage or reclamation…
As said, agriculture is largely capital-intensive, meaning most ideal business structures from say 6 years ago may not be considerable enough today. This not only applies in Davao city but also in any other agricultural regional centers in the country. Nevertheless, Davao CPAs can make considerations of successions and offer capital tax planning services which are vital for every other type of businesses as well.
Reducing tax liabilities is one of the most effective accounting strategies to increase one’s profit in doing agricultural business. There are many tax saving procedures intended to minimize the amount to be paid for taxes that only a credited and certified accountant expertly knows. Among them is the process of AVERAGING – that which enables farmers to lessen the effect of high tax rates on a successful year when preceded or followed by a bad year.
Accounting software that are specialized for agricultural businesses saves a lot of time on the part of the accountant. Here are some of today’s most widely used farm accounting software:
- FARM BIZ: Farm Biz uses a specially designed chart of accounts for Farm & Ranch businesses. No debits, credits or knowledge of complex accounting practices are needed to get started.
- INTACCT FINANCIALS AND ACCOUNTING SYSTEM: Intacct is well-known in the online accounting industry and can support small to mid-sized agricultural firms.
- SAGE 100 STANDARD AND ADVANCED ERP (formerly Sage ERP MAS 90 and 200): Streamline core financial and business management operations with Sage 100 Standard and Advanced ERP. It is ideal for farms and agriculture businesses. Modules include accounts payable/receivable, general ledger, eFiling, and more.
- NETSUITE FINANCIALS: NetSuite has several inventory management features that are useful for small to medium-sized agricultural companies. The system can track lot numbers, perform serial tracking and forecast demand based on historical data points.
- ULTRA FARM: Ultra Farm is a cash farm accounting system with integrated Payroll, Enterprise Analysis, and Perpetual Inventory. Reports include Cashflows, Crop Break-even, Livestock Analysis, Balance Sheet with supporting schedules and more. Check Writing, 1099′s and W-2 Information Returns are also prepared with Ultra Farm.
Cash flow analysis entails an accountant asking his client the following questions: How much financial amount will your agricultural/farm business require this year/month/week? When will money be needed and from where will it come? All these advanced planning strategies can help avoid short-term shortages of cash and prepares one with unanticipated expenses.
Summing it all up, in order for your agricultural business in Davao to boom, you need an accountant who:
- knows what advice to give and provides insights on your business’ current as well as its future standing
- knows the importance of bookkeeping and manages it well
- have different tricks under his sleeve on how to minimize your tax payments
- offers COMPREHENSIVE tax planning services
- have skills on how to operate a farm accounting software or two
- analyzes and manages your cash flow well
Last but certainly not least, he/she should be a certified professional in his field, a CPA in Davao City with experience in accounting for the agricultural industry; and he who knows that you value your business more than just a business but also as a way of life.