Mike Straumietis on Farmers and Record Keeping

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Advanced Nutrients' Mike Straumietis talks about the two ways farmers can record their sales and purchases.

How Can Farmers Keep Track of Their Finances? Mike Straumietis Answers

Regarding how farmers keep their financial records, they have two accounting methods: cash basis accounting or accrual accounting. According to Mike Straumietis, Founder and CEO of Advanced Nutrients, the difference between these two methods lies in the schedule or timing of when farmers record sales and purchases.

With cash basis accounting, revenue is recorded as soon as cash is received from customers. Similarly, expenses are recorded when the money is paid to suppliers and employees. In contrast, with the accrual basis, revenue is recorded as soon as it is earned, and expenses are recorded when consumed.

The Internal Revenue Service (IRS) lets farmers use the cash method of accounting for their tax returns. Most farmers choose this option because cash accounting requires income from selling farm products to be reported in the year they are sold, which may differ from the year in which they were produced. Similarly, the costs of farm inputs and services are reported in the year they are paid for, which may also differ from the year in which they are used.

Because the cash method is the choice of most farmers, it is important in the discussion of fertilizer prices, Mike Straumietis notes. Many farmers will purchase inputs needed for the next growing year, such as fertilizer, in the final months of the calendar year to reduce farm income and lower their tax liability in the current year. Unfortunately, in 2021 many farmers have been unable to purchase their fertilizer for 2022. As a result, they will likely face a higher tax bill.

Mike Straumietis also mentions the need for tariff relief to protect farmers' balance sheets. He points out that price increases, especially in instances that can be mitigated or avoided, such as the application of import duties, may impact a farm's bottom line. In fact, imports are an important part of the fertilizer supply to farmers.

The application duties—potentially in effect for five years with the possibility of extension—will result in a continued tightened fertilizer supply and a higher price for users. America's farmers know all too well that imposing the requested anti-dumping and countervailing duties on fertilizer imports can add to agricultural production costs, and, thus, they often request that they be removed.

Mike Straumietis, Founder and CEO of Advanced Nutrients, has written articles on plant growing. Find them on this site.