Each of your farms or ranches has some type of information system. The kind of information you have and how you use that information will determine the success of your operation. Please remember, the information gathered by any system only has value if it is used to make decisions.
The basic areas of any information system should include a cash accounting system with depreciation schedule, financial statements, cattle and feed inventories, and production records to measure production performance.
In most operations, your cash accounting system can be handled adequately by computer programs such as Quicken. This program and others can provide the information to meet tax needs and the basic data for preparing financial statements.
Information prepared for tax purposes does not measure the profitability of a business or its financial position. As identified by the Farm Financial Standards Guidelines, the following statements should be the minimum needed to document financial position and performance.
- Balance Sheet with both cost and market valuation
- Accrual adjusted income statement
- Statement of cash flow
- Statements of owner equity
Another segment of the information system should be your inventories. An accurate cattle and feed inventory is essential in measuring production performance and completing financial statements. A complete inventory by category of cattle (cows, bulls, heifers, stockers, etc.) should be done at least twice a year. If only done twice, the inventory should be taken at the beginning of the fiscal year and at the beginning of the breeding season. This inventory should include a record of all deaths, purchases, sales, and movements among pastures.
These basic areas of information should be addressed in each operation. Too many operations have only had tax-based information from which to make decisions. You cannot make management decisions from tax information. If you are not comfortable in the preparation of this information, get some assistance. If I can be of any help, please give me a call.