Why Agricultural Accounting Is Different

In the world we’re living in as farmers, nothing is made easy for us. We’re taught from a young age how to run the farm—when to feed, when to plant, when to harvest, the best weaning time, and what supplements or nutrients to give.

But one thing we’re rarely taught? The finances of the farm.

For generations, many families treated money as a private subject, something not even the kids were included in. But that lack of transparency has a cost. When the financial side of the operation isn’t managed well or understood, it can become one of the biggest reasons family farms fail.

The truth is, farming isn’t like running a retail store, and your accounting shouldn’t look like one either.

Product vs. Livestock vs. Planting & Harvest

A traditional business works in a simple flow: buy product, sell product, record both on the profit and loss statement.

Agriculture doesn’t work that way.

You have to track what you’re selling and how it’s classified. For example:

• Raised cattle vs. cull cattle sales are taxed at different rates.

• Breeding cattle belong on your balance sheet as assets, while feeder cattle are expenses on your profit and loss.

• Planting inputs can be treated as long-term assets (like trees) or short-term seasonal costs (like tomatoes).

Understanding those differences isn’t just bookkeeping, it directly affects how you’re taxed and how profitable your operation looks on paper.

Asset or Supply? How to Tell the Difference

A general rule of thumb in agriculture: anything over $2,500 is typically considered an asset.

But in reality, there’s a lot of gray area.

For instance, what about a $1,200 bucket for your tractor? It’s not a “supply,” but it also isn’t an entirely new piece of machinery. In that case, it should be recorded as an attachment under your tractor’s asset on the balance sheet, not as an expense on your profit and loss.

These distinctions come with experience, and they can make a big difference in your year-end numbers. That’s why finding an accountant who specializes in agriculture matters. At Empire Financial Services, we’re farmers serving farmers. We understand how these details translate to real-world savings and smarter tax strategies.

Understanding Improvements

Improvements can be another gray area. In agriculture, you’re constantly improving your land with fencing, clearing brush, and adding infrastructure, all to make it work better for your operation.

But how do you know if those costs belong under expenses or improvements (assets)?

A simple rule: if what you’re doing adds value to the property, it’s an improvement and belongs on your balance sheet.

For example, if you spend $800 on fencing in January, $300 in February, $600 in August, and $900 in October, it may seem like small, scattered maintenance expenses. But when you look at the whole picture, those are cumulative improvements to your property.

We review those details during tax planning and move things where they make the most sense for your long-term financial benefit.

Choosing the Right Accounting Software

Every industry has software designed around its needs.

• Sage is built for construction.

• Xero fits well for retail.

For agriculture, the best fit we’ve found is QuickBooks Online.

We use QuickBooks to track expenses and income, and it also supports 943 payroll filings, which most farm operations require. You can manage payroll directly through QuickBooks or pair it with OnPay, which also specializes in agricultural payroll compliance.

That said, there’s no single accounting software that perfectly fits agriculture, but QuickBooks is flexible enough to customize around the way your operation runs.

We also use Figured, a powerful tool for budgeting and forecasting. It allows us to track profitability down to the acre and generate reports that producers can take to their lenders, showing real, in-season performance rather than just tax-year results.

That level of detail can make all the difference when securing financing or evaluating the true profitability of your farm.

Why It Matters

Agricultural accounting isn’t just about balancing books. It’s about understanding your operation’s story in numbers: what’s working, what’s not, and where to invest next. This is what we’re passionate about. We help producers gain financial clarity and build operations that can thrive through market cycles, weather challenges, and generational transitions. We know farming because we’re farmers too, and that perspective changes everything.

To help producers take control of their operations, we offer a range of farm-specific resources. These include our Debits & Credits Cheatsheet, Master Debits & Credits for QuickBooks Online Journal Entries, Fixed Asset Processing Guide, and QuickBooks Chart of Accounts Tips. As an exclusive perk, Mastermind members can reach out to receive a code to download any of our digital downloads for free.

These tools are just a few of the ways we help our members gain financial clarity and make confident, informed decisions for their operations.