I know, I know, keeping track of your purchases is not the most exciting topic in the world, but, an organized office leads to a more organized and productive garden so you’re just gonna have to bear with me on this one!

Proper office procedures are as important to overall success as marketing or efficient production, so don’t ignore them!

The last thing you want to see on your desk is a pile of unorganized bills and purchase invoices. This will undoubtedly lead to you losing track of who you owe, or who owes you which will eventually erode your bottom line.

Luckily, there are procedures you can put in place that will help you stay organized and capture all money that is owed to you as well as keep track of all money you may owe. 

There are two distinct paper trails that flow in the farm business. One trail, purchases, tracks all items or services coming into the farm (such as seeds, potting soil, and fuel, each with a corresponding bill to be paid); the other sales (which I will cover in my next article), monitors all products leaving the farm (carrots, beets, or parsley, each with an accompanying invoice).

We will be tackling just the purchases trail today.

Much of the information in this article can be found in The Organic Farmer’s Business Handbook by Richard Wiswall which I highly recommend.

Purchases

Richard takes the bundling tasks approach to organization and efficiency. He works in blocks as much as possible to maximize efficiency and reduce human error. 

He recommends setting up a regular time once a week, say Wednesday from 9 am to noon, to devote to desk work.

There are three types of common purchases:

1. Ordering items over the phone or internet and taking delivery of them (like seed).
2. Driving to the store and paying or charging the item (like fuel).
3. Services and items that come to your door (like electricity).

In all cases, the business providing the goods or services supplies paperwork; a bill to be paid, a charge slip, or a receipt for paid transactions.

Purchases Folder

The simplest office setup for purchases uses two folders: one for paid bills, and one for unpaid.

If you pay a bill immediately, record the date and cheque number on the bill.

This bill is placed into a pocket folder labeled PAID BILLS, which can be kept in your desk drawer.

Future paid bills are placed behind previously paid bills so all the bills are in chronological order of payment.

This makes it easier for finding any paid bill in the future if needed.

Unpaid bills come in the mail, with deliveries, or from businesses that give you credit. 

Any unpaid bills should be kept in plain sight on your desk or another holding area in a paper holder. You can batch and process unpaid bills on a weekly schedule to keep things simple.

Gather all your unpaid bills, take the first bill, make sure it is accurate, and write a cheque for it. Record the bill, “paid cheque #____,” with the date, and circle the amount of the bill to denote what you paid. 

Example:

Now, place your cheque and bill payment stub in an envelope, seal it, and set it aside for later postage when all bills are paid (bundling tasks).

The paid bill is now placed behind the other paid bills in the pocket folder in your desk drawer.

Continue this process until all your unpaid bills are paid.

There are a few variations that should be mentioned, as not all bills come in the form of invoices.

Using Cash

Sometimes, if you’re out and about on deliveries and your vehicle is running on fumes, you may need to pay for fuel to get home.

In this case, you might not have your chequebook on you and pay with cash instead.

Fuel for your delivery vehicle is a farm expense, so you want to make sure you expense it through your farm account to take advantage of the tax benefit. 

So what do you do when you pay cash for farm items?

Write on the receipt “paid cash” and put it into the unpaid bills area of your office.

Pay that bill with farm funds as you would any other unpaid bill, the only difference is that you make the farm cheque out to yourself – reimbursing your personal funds.

Mark on the bill “reimbursement for _____, paid cheque # _____,” add the date, and circle the dollar amount.

Expense Accounts

Setting up expense accounts with monthly statements for all the businesses you routinely purchased from increases efficiency and reduces errors. 

Hardware stores, Auto Parts Outlets, feed suppliers, seed companies, and gas stations are all likely candidates for this type of billing. 

Instead of writing a check every time you purchase gas, or nuts and bolts, or a packet of seeds, let the business you buy from keep a tab going for you and then pay by monthly statement. 

You’ll never write more than 12 checks per year for each business, and you’ll be writing them at your office desk, not rushing off to finish deliveries or to bolt up your irrigation pump. 

When you get what you need at a particular store, you sign a bill and keep a copy. When you get home, you put the unpaid bill in a separate paper holder labeled ACCOUNT SLIPS near the UNPAID BILLS holder.

Example:

When you receive a monthly statement, match up the corresponding account slips, staple them to the statements, and place them in UNPAID BILLS or pay it immediately.

By setting up expense accounts and paying by monthly statements, you will write far fewer cheques and reduce errors by being more focused.

Credit Card Purchases

Paying for purchases using credit cards can also increase efficiency and reduce errors, only if you don’t have an issue with overspending.

 Credit cards must be paid in full every month: if not, the interest payments will have a  negative effect on your bottom line. 

When purchasing by credit card, keep the slip and bring it back to the office to put it in a separate holding area labeled CREDIT CARD SLIPS near the UNPAID BILLS and ACCOUNT SLIPS.

When the monthly credit card statements arrive, staple all the corresponding slips to the statement and place them in UNPAID BILLS or pay immediately, the same process is used for monthly accounts described above.

Setting Up Expense Categories

We track expenses to monitor where all our hard-earned money goes.

The amount of money coming into our checkbook is limited, so we have to make choices to spend money on some things and not others.

Knowing overall amounts for each type of expense helps determine future spending choices. 

Every market farm is unique, so there is not one universal list of farm expenses, but certain guiding forces shape the expense listings, like the tax code.

Creating expense accounts to effectively manage your business should also coincide with tax-filing requirements.

Like it or not, taxes are part of a business, so why not make it easy as possible to figure out your deductible expenses? 

Here’s a list of possible expense accounts :

• Advertising
• Donations
• Fertilizer
• Gas and oil
• Greenhouse supplies
• Insurance
• Interest expense
• Internet
• Livestock expenses
• Miscellaneous
• Payroll
• Rent
• Professional services
• Repairs and maintenance
• Seeds
• Supplies
• Taxes
• Utilities

Expense accounts keep track of costs in as much or as little detail as you want. All your expenses are tracked in a way that is most useful to you.

Tax preparation is made simpler and the accounts can be used to generate lots of useful information for analyzing your business such as Profit and Loss Statement, Balance Sheet, and Cash Flow Projection.

Computer Software

I’m not going to go into a whole lot of detail here, but it is important to note that there is computer software available to help with bookkeeping.

Many programs are available at affordable prices and they are definitely a benefit to small businesses. 

Bookkeeping software can store information, sort in any number of ways, generate reports, process taxes, reduce errors, and eliminate duplicate tasks. 

The learning curve may be a little steep with using bookkeeping software, however, once you get used to it, the program will help keep you organized and save you time in the long run.

They are definitely worth looking into to help streamline your market garden bookkeeping.

Bottom Line

You and you alone are responsible for keeping track of your purchases and consequently the flow of money into and out of your market garden business.

Staying organized and on top of your purchases and expenses will only benefit your bottom line.

While there is some great advice in this article for keeping organized in your office, you might have different ideas.

That’s good, the point is to stay on top of all your purchases using a method that works for you.

How do you keep your purchases organized on your market farm? Let us know in the comments below.

Stay Local

Kathy & Jon

your friendly neighbourhood growers