How Large Farms Scale for Success
Authored by: Kevin Block — Partner, CPA | Date Published: December 23, 2025
The calendar year is ending, but for large-scale farm operators, the work is far from over. As the year winds down, it’s the crucial time to step out of the field and into the office for a comprehensive year-end financial checkup. This thoughtful review will help you in setting your farm up for robust profitability and resilience in the New Year.
Here is your comprehensive guide to the key financial areas to focus on before the new year arrives.
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Reviewing the Past Year's Performance
Effective planning starts with understanding your past. Take a close look at your Profit & Loss, Balance Sheet, and Cash Flow statements to get the full picture.
Spot the trends that matter. Are input costs outpacing revenue? Did certain commodities overperform or underperform? These insights reveal where operational improvements are needed.
Factor in what’s beyond your control. Market swings, severe weather, and policy shifts all shape your results. By understanding these forces, you can build more effective hedges and contingency plans for the year ahead.
Tax Planning: Strategic Moves Before December 31st
For agricultural businesses, December is a crucial time for tax planning. Taking proactive steps now can substantially reduce your tax liabilities and position your operation for financial success in the coming year.
Income and Expense Management: Carefully review how and when you recognize income and incur expenses. Common approaches include accelerating needed expenses into the current year or deferring income to the following year, optimizing your tax position.
Utilize Section 179 Deductions: Take advantage of the Section 179 Deduction, which lets you deduct the full purchase price of qualifying equipment and software (up to the annual limit) placed in service by year-end. This incentive can make capital investments far more affordable.
Prepaying for Expenses: Consider prepaying certain expenses for the upcoming year, such as fertilizer, feed, or supplies, to secure a deduction this year. Always comply with IRS guidelines, especially the “one-year rule” for prepaid expenses.
Estimated Tax Payments: Double-check your final estimated tax payments to avoid surprises or penalties come tax season.
Budgeting and Forecasting for the Upcoming Year
Accurate financial foresight is the foundation of effective farm management.
Develop Accurate Projections: Build a detailed budget that estimates revenue and expenses for each segment of your operation.
Integrate Market Intelligence: Factor in projected commodity prices, expected changes in input costs (such as fuel, seed, and chemicals), and regional weather forecasts. With these insights, you’ll manage cash flow more effectively and make informed decisions on planting, purchasing, and marketing.
Inventory Valuation and Management
For year-end financial reporting and tax purposes, accurately valuing your inventory (harvested crops, livestock, supplies) is essential. The valuation method you choose, such as cost of goods sold or market value, can significantly impact your financial statements. Consult your accountant for the best method for your operation. In addition, implement detailed inventory tracking systems to minimize losses from spoilage, theft, or misplacement. Knowing exactly what you have is the first step to maximizing its value.
Capital Expenditure Planning
Major equipment purchases and infrastructure upgrades form the backbone of a successful, modern farming operation. Thoughtful planning in these areas promotes long-term productivity and sustainability.
- Evaluate Needs: Assess the age, condition, and efficiency of your equipment. Consider whether a new combine could accelerate your harvest or if upgrading your irrigation system could better protect against drought. Prioritize investments that directly address your farm’s biggest challenges.
- Strategic Investment: Analyze the potential return on investment (ROI) for each capital purchase. Determine how the new asset will reduce costs, increase yields, or provide operational efficiencies that enhance your bottom line.
- Securing Financing: Plan your financing needs well in advance, whether through operating loans, equipment leases, or government programs.
Succession Planning Review
For multi-generational farms, year-end is an ideal time to hold meaningful family discussions about the future. Review your existing succession plan. Have family circumstances, tax laws, or the size/structure of the farm changed? Make necessary adjustments for a smooth transition of management and ownership when the time comes. Proactive planning protects both the family legacy and the business.
Meeting With Your Accountant
The final and most effective step is to schedule a dedicated year-end meeting with an accounting professional. They are the knowledgeable partners who can integrate all aspects of your financial planning, from tax minimization strategies to financial statement analysis for a compliant, successful operation. Don’t let valuable opportunities pass you by. Take charge of your finances now to cultivate a long-lasting future for your large-scale farm.