TAKING CARE OF BUSINESS: Having a Plan and Keeping Accurate Records
There are two important factors in forest land management that are often overlooked by owners: a business plan, and keeping good financial records. A written business plan is important in identifying an owner’s goals. While these may be very clear in one’s mind, putting it on paper can help identify whether the goals are feasible, whether the timberland will make money for the owner, and whether the business will perform as expected. A written plan can also help owners change the course of their business if necessary. Sometimes an idea looks much different on paper than it does in one’s mind.
In addition to a written business plan, keeping accurate and detailed financial records is crucial for landowners. These records have a long term effect on both taxes and decisions regarding management of the land. The Internal Revenue Code identifies three types of land owners: investment; passive business or trade; and active business or trade. The difference in classification has a large impact on the deductions available to an owner. For an owner to benefit from federal income tax laws, formal records of forestland owner’s involvement are a necessity. The same records used to figure tax benefits can help forest managers make decisions regarding the management of the land. It is by far to a tax payer’s advantage to be considered an active trade or business when it comes to deducting expenses incurred.
Records don’t need to be complicated to be effective. Each financial transaction made should be written down, with the date, a description of the activity, the part of the property involved, the type of activity, time of both the owner and hired labor, and any other expense or revenue information. An activity log describing each activity can be quite useful for recording this information. Very active landowners may want to use an electronic format of some kind (spreadsheet, or other computer program) to maintain their records. Investing the relatively small amount of time to keep accurate records initially can save much time and frustration in the long run.
The Internet is becoming one of the fastest, easiest ways to gather information on a particular subject. Because of the massive amounts of information available, it can be tricky to know where to begin. Following is a list of useful forestry-related web sites. Many links are also available by visiting our web site at www.someforest.com.
forestry.about.com/science/forestry list major categories for easy searches, and offers information on alternative sources of income for tree farmers.
www.srs.fs.fed.us/index.htm is the USDA Forest Service Southern Research Station. It offers more than 900 papers by USDA scientists to browse through.
www.treefarmsystem.org is the American Tree Farm System site. In additon to the information on it’s Forests for Watersheds and Wildlife Initiative, the site offers information on current events, local assistance, and forest management.
www.reeusda.gov is the site for the Cooperative State Research, Education & Extension Service. This site offers valuable technical assistance in the form of a directory of professionals with diverse expertise.
These are just a few of the resources out there. Many more can be found by following links, or doing general searches of your own