Do you have big bills for hay or seed that come across your desk in Feb. or March? If you’re like me, with animal sales in the late summer and fall, you don’t want big bills you need to pay in the late winter. It may make more sense for farmers like us to pre-pay big bills in the current year rather than wait until next year.
Some suppliers, such as my propane co-op, will give a discount if I buy in the “off-season.” It helps their bottom line, too, to get my payment now rather than at peak time. Buying before the end of the year means that I can claim those expenses in the current tax year rather than next, and will help reduce tax liability if I’ve had a good income year.
To decide if paying this year or next makes most sense, I need to do some rough figuring or visit my tax accountant. If it looks like I had more income than expenses so far in the year, paying for next year’s propane, seed or soil conditioners may, in the long run, put a few more dollars in my pocket. For more information on how pre-paying can help, see pages 92-109 and 140-146 in the MOSES book Fearless Farm Finances.
Jody Padgham is the Financial Director for MOSES, and Editor of Fearless Farm Finances.
November 14, 2013