It can range from a simple, single-entry accounting system (with a shoe box — or pick up dashboard filing system) that will satisfy the IRS for tax purposes. But, such a system will provide you with little to no management information. It is a cheap way to go.
On the other hand, gaining information that is useful for management purposes can involve a full blown enterprise costing system.
At any given time, the owner could ask what he “had in ’em” (referring to a particular group of calves that were weaned in a specific year from a specific ranch and are now in the feedlot and ready to go to slaughter) and I could tell him to the nearest $/Cwt. But it cost him.
Note that simple systems are cheap and complex systems are expensive–it is the way the world works. — jtl
By Jo Windmann via AgWeb.com
Understanding the levels of accounting can help you organize your finances and make better business decisions
When it comes to managing the various aspects of your farming operation, sometimes it’s easier to visualize the different layers in order to organize the many elements involved. Numbers can get confusing, jumbled or simply overwhelming when you try to tackle everything at once.Here’s how Paul Neiffer, a certified public accountant with CliftonLarsonAllen LLP and the author of “The Farm CPA” blog, explains the various levels of accounting on the farm, using a clever analogy.According to Neiffer, there are four basic levels of farm accounting.
- 30,000-foot view. This is a high-level overview of your operation. It consists of three basic elements: revenue, expenses and bottom line. This level isn’t broken down into crops or machinery; it is simply a look at overall revenues, overall expenses and your bottom line.
- 10,000-foot view. When you drop down to the 10,000-foot elevation, you begin breaking it down by crop. How much did the corn crop make? How much did the soybean crop make? These types of questions are answered at this level.
- Field view. Neiffer describes this level as hovering over the fields with a drone. You begin to look more closely at your operations, looking at your farm operations by quarter-section or similar breakdown. This is the level where you get more detailed and determine which fields perform better than others.
- Ground level. Technology and big data are getting us closer and closer to this level. Neiffer predicts farmers will soon be able to dig all the way down to the soil level and know how much they make given a certain soil type. “The data is available now to the farmer,” Nieffer says, “it’s just a matter of the software catching up to it.” He believes farmers could do this now, but the cost/benefit ratio just isn’t there yet.
What level of farm accounting do you feel most comfortable with? What level is most challenging on your farm? Let us know in the comments.
A Handbook for Ranch Managers. In keeping with the “holistic” idea that the land, the livestock, the people and the money should be viewed as a single integrated whole: Part I deals with the management of the natural resources. Part II covers livestock production and Part III deals with the people and the money. Not only would this book make an excellent basic text for a university program in Ranch Management, no professional ranch manager’s reference bookshelf should be without it. It is a comprehensive reference manual for managing the working ranch. The information in the appendices and extensive bibliography alone is worth the price of the book.
You might also be interested in the supplement to this Handbook: Planned Grazing: A Study Guide and Reference Manual.