One method to reduce next year’s expenses is to claim this year’s supplies as a pre-paid expense.

There are a few rules to consider when using pre-paid expenses when claiming expenses as 2012 deductibles.

The best recommendations is to review your situation with your tax advisor who can help with recommendations in building your year-end plan and define the requirements for putting the plan into action.

It is key to have the cash-flow to handle the purchase of pre-paid expenses before the end of the year farms will need to do some detailed planning.

Some farms have used their operating line of credit to fund these purchases with the ability to pay these borrowed funds back shortly after the start of the new year with crop sales.

In many cases the early seasonal discounts offered by some of the seed, fertilizer, chemical and other supply companies have more than offset the credit cost of borrowing the funds for three to five months.

However, if you see that the drought will reduce your crop carry-forward this may limit the cash income that will be generated by the winter sales of 2012 crops.

Implementation of a plan now may be needed to avoid cash flow or credit problems as the year rapidly closes after fall harvest is completed.

It seems common that when fall harvest kicks in farms have little time or ability to focus on other risk or management activities so now is the time to develop year-end plans.

Farms have often depended on last minute equipment purchases as an expense management tool in the past, but for 2012 as equipment purchases will do little to help reduce the 2013 production expenses, you may want to consider another option.

Every farm needs to expand their window of financial cash-flow planning into a multi-year framework to obtain the farms very best potential results.