You most likely have a few different sales outlets and streams of income coming into your market garden. That is awesome! Keep up the great work!
How do you keep all your sales invoices organized so you are getting paid for the products leaving your market garden?
In this article, I provide some useful office organization tips to help you find the most efficient way of processing your sales paper trail.
Much of the information provided is from the highly recommended book by Richard Wiswall called The Organic Farmer’s Business Handbook.
A place for everything and everything in its place.
Keep this phrase at heart when you are setting up and organizing your farm office.
In my last article, I mentioned using labeled paper holders to house your paperwork until you have had a chance to process it and file it away.
The same goes for sales invoices, create a holding area for cheques and invoices until you have time to process them.
Tackling your paper trail should be done at a designated time once a week so you don’t get too behind in your farm paperwork.
How Do You Process Sales Papers?
When you receive a cheque (or cash) upon delivery for an invoice of farm products, write “paid check #____” or “paid cash” and place the payment and invoice together in a holding area for payments.
If payment is not paid upon delivery, write “Not Paid” on the invoice and put it in an alphabetical accordion folder of unpaid invoices, also in plain view.
Farmer’s market sales money and CSA payments go directly to the upright paper holder for payments along with a piece of paper explaining the payment.
Just to clarify, Richard uses an upright paper holder for payments (with a corresponding paid invoice or paper attached) and an accordion folder for unpaid invoices.
When a cheque does come in for an unpaid invoice, place the cheque in the upright paper holder with other payments.
When you are ready to make a deposit to the bank (usually once a week), first retrieve all the cheques and cash from your upright folder.
Next, take a blank piece of paper as a cover sheet for the deposit.
Write FARM DEPOSIT and the day’s date at the top and list all the cheques and cash payments below the title. Include account names followed by the amount of the cheque.
Farmer’s market and CSA payments each have their own heading.
Small accounts or those sold to infrequently are listed under the heading MISCELLANEOUS SALES, each with an accompanying explanation.
Now match up each payment with the paper trail used to track all sales from the farm.
This ensures that every product is paid for. Some parts of the sales paper trail are attached to the payments in the upright folder, like invoices that were paid at the time of delivery, or the inventory sheet with sales from the farmer’s market.
Some payments, like cheques that come in the mail, still need their paper trail companion.
These are found in your alphabetized accordion file where all your unpaid invoices are stored temporarily until matched up with the payments of the appropriate invoice(s).
Your invoices now have a record of payment and are placed under the farm deposit title page.
If payment is a regular cheque without a separate listing, just staple the corresponding invoices together and write on the top invoice ‘paid check #___, $____,” and add the date.
All the invoices with a record of payment are placed under the deposit title page.
Also placed under the title page are the farmer’s market inventory sheet that lists the total cash and total cheques collected, and something explaining CSA payments (a form, invoice, or note).
Miscellaneous sales have invoices or a note on the title page explaining the transaction.
Staple or rubber band the papers together.
The bundled deposit with a title page is now done and placed in chronological order with other deposits in your desk drawer (or where you choose to keep them).
Now for the money.
Take all your cheques and stamp them with a FOR DEPOSIT ONLY rubber stamp from your bank and list them on a bank deposit slip.
Add in cash and calculate the total for the deposit slip.
This total must be identical to your bundled deposit with the title page. If not, redo your math until the two totals match.
All that’s left to do is take a trip to the bank and make a deposit. By far the best part of this process!
Organizing sales invoices for deposit is a very manual process. You better break out your pencil and calculator for this one!
That being said, there is bookkeeping software available to help with this task if you prefer the clickety-click of a computer as opposed to the crunchety-crunch of the calculator.
Do what works for you.
I focused on manually organizing your deposits because that is what we will be doing this year. I don’t know too much about bookkeeping software, so I cannot recommend any in good conscience.
If you know of some good software, feel free to leave a recommendation in the comments down below.
Potential Sales Leaks
Financial leaks drain money from your market garden business, often without you knowing it’s even happening.
You don’t want that now do you?
Plugging up any financial leaks will keep your hard-earned money in your possession, where it belongs.
There are many ways financial leaks can creep onto your farm. Let’s examine some.
The biggest potential for financial leaks with a CSA is not payment collection, but rather giving away too much product for the money you receive. This can seriously erode your profit potential.
To avoid this, make sure you are giving the amount you stated in your initial CSA sign-up, and no more. You don’t want to give away your produce for free.
As I just mentioned, giving away too much produce is a major sales leak. Rounding produce weights with a hanging scale (1 ⅛ pound to 1 pound, for example) adds up over the course of a market, especially with a high price per pound items.
A way to avoid this is to use self-calculating digital platform scales for easier math calculations over the hanging scales.
Using digital scales helps make purchases a win-win for your customers and your farm.
Both you and your customer can each see the weight and dollar amount on the scale’s display, and the customer is assured that human error has been eliminated.
These scales are a little pricey at around $300 each but will pay for themselves in time since you won’t be losing any more money on erring to the side of the customer.
You get the exact weights that are fair for you and your clientele.
Surprisingly, sales that have invoices can pose more of a financial leak to your market farm business than the CSA or farmer’s market, despite the reliable paper trail associated with invoices.
Why is this, you ask?
First off, invoiced sales can represent a large portion of a farm’s total sales. These sales are often delivered while on the road and away from your desk and are more likely to be forgotten, altered, or lost.
As well, math errors are more likely if you are in a hurry when making invoices at the point of delivery.
In contrast, CSA and farmer’s market lists are usually calculated at the calm of your office desk.
It’s a good idea to get in the habit of writing out invoices for any sale that has a possibility of slipping through your financial cracks.
For example, a customer comes to the farm and casually buys a bag of carrots. Record it on whatever is handy and put in your PAYMENT FOR DEPOSIT folder on your desk before you forget.
Using duplicate or even triplicate invoices can help reduce the chance of an invoice getting lost and you not getting paid.
Any invoices left over in your accordion file after you make your deposits should be looked into to see if they are past due or not.
Any customer with an invoice overdue requires a friendly call to remind them to pay up.
At the end of the day, it’s up to you to follow your paper trail and ensure all payments make their way into your bank account.
It’s easy to make mistakes when totaling your invoices. This can happen to the best of us.
Often miscalculations are not even caught by the buyer because they are paying what is totaled on the bottom line.
Bad math can easily go unnoticed. However, there are two procedures you can put in place to help minimize it.
First, double-check your math or have someone else do it.
The second way is to input your invoices into bookkeeping software on your computer.
The bookkeeping software will alert you to any math errors so you can correct them.
We’re talking taxes here. Taxes can take quite a bit out of your earnings. It’s important to offset your farm income with every true farm expense, otherwise, you will be paying more in taxes.
Neglecting to record all farm expenses is an unnecessary leak.
Luckily it’s an easy fix – Document all farm expenses!
Sidenote: If you are using a personal vehicle for transporting farm products, keep track of the mileage and you should get a tax deduction for the miles you put on your car.
The more organized and diligent you are at keeping track of all the sales paperwork, the more money you will end up with in your bank account.
This is probably your least favourite part about owning your own market farm, but by putting aside a specific amount of time on a specific day, your office management tasks will be a little less painful.
Start off by organizing your office, labeling file folders, and having a home for everything so your desk is not a cluttered mess.
Remember, you need to make sure you are getting paid the right amount of money at the right time.
Nobody is going to do a better job at looking after your bottom line than you.
How do you track your sales invoices? Let us know in the comments below
Kathy & Jon
your friendly neighbourhood growers