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Growth Path Accounting: Part 5

Posted by Norman Brown

Nov 10, 2016 1:38:58 PM


In prior installments in this series, we covered the two key questions in the Growth Path Accounting Decision Tree.  Now we continue tracing the accounting results from these decisions.
 If your current accounting method is strictly  accrual, you're using professional accounting oversight and you're not concerned with real-time inventories and/or managerial (cost accounting you've already selected  Accounting Method A (Accrual Focus).  

What Does Method A look like?
1. No integration with production information.   If you're tracking field or livestock performance records, they'll be isolated in separate, unconnected databases (or sheets of paper).

2. Limited cash accounting.  Producing a cash-basis Schedule F tax return will likely require meticulous external adjustments.

3. Partial inventory tracking.   Even if your accounting system includes an inventory module it's likely not easily adaptable to the detail and dynamics of agricultural inventories so you probably will also rely on separate forms or spreadsheets.

4. "Mainstream" GAAP accounting that reliably reports historical financial activity at the expense of farm management detail.  
What are the benefits of Method A?

1. Can produce accrual financial statements that accurately compute profitability.

2. Anyone with an accounting background can understand the reports.

3. Will work with an "off-the-shelf" accounting program rather than more expensive and specialized ag accounting software. 

4. Doesn't require that your controller or bookkeeper understand agriculture 

What are the downsides of Method A?

1. Hard to monitor cash tax position because of the timing differences in cash and accrual transactions.

2. No unit cost analysis by commodity, crop year, farm, field or group.

3. Restricted accounting control because of the challenges of inventory control or reconciliation.

4. Requires formal accounting training to maintain.

Many larger farmers choose Method A strictly on the advice of their CPA, controller or CFO because it's what these professionals are already comfortable with. 

Method A, while highly-sophisticated, may not take you to your ultimate destination.  Be prepared to follow the Growth Path we'll describe in upcoming articles.

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Topics: growth path accounting, cash or accrual

Growth Path Accounting: Part 4

Posted by Norman Brown

Nov 3, 2016 10:55:38 AM


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Topics: growth path accounting, cash or accrual

Growth Path Accounting: Part 3

Posted by Norman Brown

Oct 27, 2016 9:10:12 AM


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Topics: growth path accounting, cash or accrual

Growth Path Accounting: Part 2

Posted by Norman Brown

Oct 21, 2016 12:03:32 PM

Last week our blog on Growth Path Accounting presented theStep One question, "Where are you now?" in regard to accountingmethod (cash or accrual) and accounting oversight (family or professional). 

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Topics: growth path accounting, cash or accrual

Growth Path Accounting: Part 1

Posted by Norman Brown

Oct 13, 2016 4:15:26 PM

Surveys of farm computer users reveal that they believe that accounting is their computer's most important function.  Unfortunately, selection of the right farm accounting system has been a hit-and-miss exercise. Growth Path Accounting provides the farm manager with step-by-step procedures for selecting and maintaining his accounting system.

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Topics: growth path accounting, cash or accrual

Accounting Method Cost and Returns

Posted by Norman Brown

Oct 3, 2016 12:52:26 PM

Accounting Methods A (Accrual), B (Hybrid), C (Cash) and ABC (Integrated Cash, Accrual and Managerial).  We learned that most farmers "default" to Method C because of its ease of use while larger firms choose Method A because of its wide acceptance by accounting professionals.  However, when we plot management value against effort expended we gain a new perspective.

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Topics: cash or accrual

What do top producers have in common? [How you can implement similar practices]

Posted by Sarah Dixon

Sep 21, 2016 2:03:39 PM

What do top producers have in common?

Everyone wants to be the best, do their best.  You do not farm with hopes to fail.  Unfortunately, some do fail, operations go under and are sold all of the time.  Many of those owners are left wondering what they could have done differently to keep their operation afloat.  Not all of those operations were salvageable, but some could have probably been helped along by just implementing a few of the same practices that the top ag producers of today have implemented in their own operations.  Having a strategy, having contingency plans, having the tools to make quick decisions, the courage to say “no it is not working,” the drive to keep learning and the humbleness to say “I don’t know but there is someone out there who does.”  Those are a few of the things top producers have in common that make them successful.

Here are some great videos that may be helpful in understanding these practices better:

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Topics: Life Cycle Budget, Farm CFO, Danny Klinefelter, accrual accounting

Sample - How To Post

Posted by Sample HubSpot User

May 5, 2014 3:31:58 PM


Your “how to” blog post should teach the reader how to do something by breaking it down into a series of steps.

Begin your blog post by explaining what problem you are going to solve through your explanation and be sure to include any relevant keywords. Add in a personal story to establish your credibility on this topic. And make sure to end your blog post with a summary of what your reader will gain by following your lead.

Need some inspiration? Check out these "How-To" examples from the HubSpot blog:

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