The winter trade show season has arrived in earnest, and along with the usual Midwest locations you can now look us up at the National Cattlemen's Beef Association National Convention and Trade Show in Phoenix, Arizona, January 28-31.  We'll be helping at the Johnson, Miller & Co., booth 1452.  Johnson, Miller is a CPA firm based in New Mexico and West Texas that will be offering FBS e.CLIPSE managerial accounting to its clients.

Other trade show venues include:

•	Iowa Pork Congress, Des Moines, January 28-29 (Booth 207)
•	Illinois Pork Congress, Peoria, February 3-4 (Booth 806)
•	National Farm Machinery Show, Louisville, February 11-14 (Booth 620A)
•	Commodity Classic, Grapevine, Texas, February 26-28 (Booth 745)

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Make the most of the upcoming farming season with "Spring Training" with FBS.  Unlike major league baseball you don't have to travel to "grapefruit country" to get in shape; our trainers will come right to your farm.  March is our busiest training month so contact us right now at 800-437-76 38 or e-mail sales@fbssystems.com to schedule your appointment or to visit about how we can help.

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"Choose your rut carefully.  You'll be in it for the next two hundred miles."

Sign on the Alaska Highway

The cyclical nature of production agriculture reinforces the cultivation of habits—some helpful, but many ultimately counter-productive.  For example once we've learned the least painful way to accomplish a routine chore, we naturally stick to this path of least resistance even if that "rut" no longer leads precisely in the right direction.  The challenge is recognizing when the familiar tools and processes that were adequate five or ten years ago are now hindering our competitiveness.

The following survey will help you determine whether you may be falling into—or even stuck already—in a management practices rut that is preventing your from reaching your goals.  Please honestly review these questions and check the appropriate boxes.

Note:  some of the questions have been adapted from a management proficiency survey prepared by management consultant Dick Wittman and administered by Ron Swanson at the 2008 FBS Users Conference.

Management System/Personnel Administration Proficiencies	In Place Now	Working On It	Need It	Don't Need It
Written job descriptions/division of responsibility in place
Performance appraisals done regularly
Performance records shared regularly
Financial oversight by a trained accountant (either on-site or virtual)
Corporate culture that places a high value on information
"Information czar" coordinates the timely accumulation, processing and dissemination of data
Standard Operating Procedures defined for data recording and other repetitive processes
Computer inventories are reconciled< with physical inventories
Reliable information reaches managers in time to make quality decisions
Financial Management Proficiencies	In Place Now	Working On It	Need It	Don't Need It
Balance sheets reflect cost and market valuations & deferred tax liabilities
Income statements measure true farm profitability on an accrual basis
Audit systems assure Balance sheets and Income statements reconcile to inventories and bank/loan balances
Profitability and cost tracking by responsibility centers
Field and livestock records are complete and accessible
Cash flow budgets are prepared at the beginning of the year and are monitored and adjusted throughout the year
Budgeting system shows projected borrowing and repayment schedules and accrual net income
Key performance measures (KPIs) and ratios are calculated annually
Lender understands financial reports< and accounting processes
Marketing Proficiencies	In Place Now	Working On It	Need It	Don't Need It
Marketing function assigned to specific person
Inventory to market defined well in advance of production
Market targets established based on known cost of production, margins or profit targets and cash flow requirements

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Editor's note:  FBS users have a unique edge when it comes to implementing the management strategies recommended here by the Iowa State Ag Extension Economics Department.  Tools like TransAction Plus, LifeCycle Budget, Crop Audit and e.CLIPSE managerial (cost) accounting provide the accurate, detailed and timely information needed to adjust to uncertain times.

AMES, Iowa — The agricultural sector seems like an island of tranquility in the midst of worldwide financial and business collapses, rising unemployment, record home foreclosure rates and government deficits. Farm producers and managers, who have enjoyed historically high farm net worth values and real U.S. net farm income significantly above 1990s levels, are beginning to see economic conditions influence their business.

Iowa State University Extension agricultural economists have advice for crop producers as they face higher inputs costs and selling prices well below the peaks of 2008. Their advice also holds for livestock producers who have had to endure many months of thin or negative margins.

"The future is extremely uncertain and managers need to prepare by thinking in terms of contingencies - having plans for a number of possible situations that will be revealed later in the year," said Robert Jolly.  "Farmers and lenders need to think in terms of contingencies - what should be done if conditions worsen, asset values decline or if rural and agricultural lenders start to experience liquidity problems."

Jolly and William Edwards, another ISU Extension agricultural economist, describe in recent Ag Decision Maker (AgDM) articles what they know about the current financial condition of farmers in Iowa and suggest a few options for managing through some very difficult and uncharted waters.

In his article, Edwards offers a list of possible financial management practices and strategies that could come in handy, including:

Prepare an accurate set of financial statements.  Highly variable inventory prices and increasing land values will make this year's balance sheet look quite different from last year's.  And for grain farmers, a net income statement for 2008 may be something to share with your lender.

Prepare a detailed cash flow budget.  Many crop farmers will have a hard time meeting all their cash commitments from sales in 2009.  Higher input costs and rents will increase operating line requirements.  Livestock farmers will need to budget feed purchases carefully.

Shop around for inputs.  Depending on when suppliers booked fuel, fertilizer, pesticides and other inputs, prices may vary dramatically.  Consider both cost savings and yield effects when applying inputs.  For example, cutting back on nitrogen fertilizer when costs are high makes sense, but only up to a point.

Know your costs of production.  When profitable selling opportunities arise, lock them in.  Watch for opportunities to price crop inputs, feed and feeder livestock, as well.

Document yields for a possible crop insurance or SURE payment.  Many crop producers will receive an insurance indemnity payment due to falling prices in 2008 as well as from damage caused by rain or floods.  Additional payments may be available under the SURE disaster program in the new farm bill.

Increase crop insurance coverage for 2009.  Higher production costs may require higher levels of protection to assure a breakeven level of revenue.

Consider enrolling in ACRE.  Under the new farm bill program, Average Crop Revenue Election, crop producers can substitute a gross revenue protection plan for the current price counter cyclical program, with guarantees based on higher price levels and current yields.

Use flexible lease agreements.  Tying cash rents to a formula that takes into account both yields and prices will help protect margins.

Defer capital purchases and income taxes.  When margins are narrower, replacing machinery, putting up new storage bins or bidding on more land may have to wait.  Replacement parts and overhauls are cheaper in the short run.

Compare financing rates and consider refinancing long-term obligations.  Federal interest rates are at historic lows.  There may be wide differences among agricultural lenders.  Marketing loans from the Farm Service Agency also are available for short term financing.  Compare possible interest savings to the costs of rewriting the loan.  It may be a good time to convert variable rate loans to a fixed rate.

Keep assets liquid.  If gross revenue is not enough to cover production costs and family living expenses this year, keep funds in savings or short-term investments rather than assets that would be hard to convert to cash.  Use equity in land, livestock and equipment.  If cash reserves aren't enough, talk to your lender about borrowing against fixed assets, with a multi-year repayment plan.

Agriculture has always been a cyclical industry.  A good financial manager learns to balance the profits and losses to ensure long-term survival.  Financial management tools to support the practices and strategies mentioned in this article are linked in the January Ag Decision Maker article.

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Join us for these free webinars at 10:00 am CST:

•	"Open line Friday" (first-come-first-served software questions) on Friday, February 6
•	LifeCycle Budget on Monday, February 9
•	Crop production and cost analysis on Monday, February 23

If you'd like to attend any of these virtual meetings, e-mail norm@fbssystems.com by 8:00 am CST on the day of the webinar to receive login instructions.

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SOFTWARE Q&A – WITH Q'S FROM YOU, OUR CLIENTS! Send us your questions/problems–be they short, long, simple or downright frustratin'!–about SeRVware and we'll handle them right "on the air" for the benefit of all. Q. My inventories, which were balanced at one time, no longer tie out.  However, if my report date range begins in the prior year, everything is correct. A. Your first step is to recreate January 1 beginning inventories.  Go to Utilities | Create Beginning Balances and check the appropriate module:   •   Check Accounting for bank and ledger balances.   •   Check Crops for seed, chemical, fertilizer, fuel and stored crop inventories.   •   Check Feeding for feed, drug and livestock inventories.   •   First and Last year will normally be the year in which you're having problems. Why you need to do this: FBS data files are defined by calendar year.  The first time a new year (such as 2009) is opened, prior year account and inventory balances are automatically transferred to the year.  However, if you make any changes in a prior calendar year, you'll need to manually transfer those ending balances into the new year through Create Beginning Balances.  Incidentally, once these balances are correct, FBS software will allow you to specify any date range within or across years and your inventories or asset, liability or equity account balances will be correct. Top of Page         sales@fbssystems.com 800.437.7638

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