Authors: Assistant Professor and Graduate Research Assistant, respectively, Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces. (Print Friendly PDF)
Financial record-keeping is a vital part of the success of many small- to large-margin operations producing agricultural commodities in a competitive business environment today. These records are essential to gaining a full understanding of the financial condition of the firm. Understanding the operation’s financial situation allows for more accurate decision making; this has beneficial impacts on the liquidity and solvency of the agribusiness. A basic but very useful software package that is available for producers today is QuickBooks Pro. This program is comprehensive but user-friendly and will allow a broad range of users to begin compiling better records, leading to better financial decision making in the future.
QuickBooks Pro 2007 provides a small business with a practical financial software package that can be beneficial in a wide variety of agribusiness and production agriculture settings. QuickBooks Pro 2007 has the ability to easily organize sales receipts, pay bills, create estimates and invoices, track vendors and customers, and write checks, as well as generate financial statements, organize payroll records, and assist in preparing state and federal tax returns. The program is user-friendly and can be set up for an agricultural business to provide a variety of financial decision making options for the proprietor.
Establishing the Firm
After installing QuickBooks Pro on the computer, the user can start the program by clicking on the QuickBooks icon on the computer desktop. The first window that appears on the screen allows the user to learn more about the program, create a new company account, or open an existing company account.
To get started, select the “Create a new company” file option. From this point, QuickBooks will take users through its EasyStep Interview (Figure 1), which will customize the program to fit the user’s business based on simple questions about how the business is set up, including the legal business form, whether or not the business charges sales tax, and what types of employees, if any, are hired by the business (Figure 2). Pay close attention when selecting income and expenses accounts (Figure 3) that will be used in the business. These are the various accounts that generate income and expenses and will be categorized for future reference. Even though accounts may be added or subtracted later, it is beneficial to organize them as well as possible from the beginning. This will allow a comprehensive compilation of data that will benefit the producer in decision making and tax management.
Figure 1. EasyStep Interview.
Figure 2. EasyStep Interview, continued.
Figure 3. Income and expense accounts.
After completion of the EasyStep Interview, QuickBooks Pro will be customized to the producer’s business and will be ready to use. At this point, QuickBooks gives the user the option of viewing a tutorial on program basics (Figure 4). This tutorial is a very useful presentation that will benefit the producer in their understanding of the financial package they are employing. It is also possible to skip the tutorial and go straight to the main operating screen for the company file just created (Figure 5).
Figure 4. Tutorial.
Figure 5. Main operating screen for the company file.
One of the most powerful tools included in the QuickBooks Pro software is the report generator, which can provide an overall financial picture of how the company is performing over time. Comparing and contrasting year-to-year, and considering the financial changes that have occurred within the firm over the past accounting cycle, will be valuable decision-making tools. The program will create reports such as Profit and Loss Statements, Income and Expense Statements, Balance Sheets, Net Worth Statements, Cash Flow Statements, and Forecast Statements, which will be useful in forward planning. These financial statements allow a business manager to make sound financial decisions based on the information provided by QuickBooks. This task would be much more difficult without the assistance of the program in collecting and organizing data for the business.
Even though QuickBooks Pro is easy to use, as with any software package there are challenges. First of all, it is important to enter the correct account balances, outstanding debts, and accounted-for revenue from the start. If, to begin with, incorrect information is entered, or information is missing, future financial reports generated by the software will not be accurate. Secondly, it is important to stay current when entering data; this allows the producer to understand the current financial status of the production unit. In many instances, producers get behind in entering receipts and revenue generated, and in doing so render the program useless because it is out of date. Spending an hour every week entering relevant financial data when necessary allows the user to generate accurate financial statements any time at a moment’s notice.
The employment of a software package that will facilitate an owner’s ability to make informed financial decisions in a competitive business environment is essential to long-term financial success. The ability to make informed financial decisions will be valuable in the generation of greater net returns on an investment, which is of primary importance for any business today. There are various financial management software programs available, and the user should determine which is best given his or her preferences and specific financial management needs.
To find more resources for your business, home, or family, visit the College of Agricultural, Consumer and Environmental Sciences on the World Wide Web at aces.nmsu.edu.
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New Mexico State University is an equal opportunity/affirmative action employer and educator. NMSU and the U.S. Department of Agriculture cooperating.
Printed and electronically distributed September 2008, Las Cruces, NM.