Financial management can be a crucial part of ensuring farm profitability. Conversations about the agricultural industry tend to focus more on the production side, whether it’s crops, livestock, or the market impact on those commodities. 

However, farm managers know not to underestimate the necessity of understanding profit and cost centers in a farming operation. Having a firm grasp on the basics and knowing how to measure profitability is vital for ensuring the long-term viability of your agricultural business.

Running farm operations means obtaining supplies from outside vendors and paying them on time. Accounts payable (AP) refers to the money that is owed to these suppliers after you’ve made purchases with credit. As you need more goods from more manufacturers, this information can quickly become disorganized. Missed deadlines or duplicate payments will cost you money in the long run, but an automated system will help reduce these unnecessary costs and stay ahead of your payment due dates. 

Farm management covers a broad scope of factors. From inventory management to long-term production cycles, having the right tools in place for farmers, farm managers, and agricultural accountants helps keep things running smoothly. Of course, management accounting is helpful for organization, but leveraging ERP software to complement advanced agricultural accounting strategies is an excellent way to help minimize expenses and maximize profits. 

You may have heard the term enterprise used when referring to a more traditional button up business world. And yet, it can also be applied to agricultural businesses. In this blog alone, we regularly reference our software solution as farm ERP software, enterprise resource planning. You may have also heard of enterprise accounting. But what exactly is an enterprise? What does that mean and how does it help us manage our farms? Our agricultural business? And, how can we leverage enterprise strategies, taken from more traditional businesses, and apply them to our work?

When you’re running a farm made up of multiple specialized enterprises, trying to use solutions designed for other industries or smaller operations just won’t work. However, regardless of the size of your operation, the purpose of farm information has always been to better inform the decisions you make whether that’s focused on a single vertical or an entire farm or ranch. Unfortunately, a lot of farm management strategies were developed before we had the ability to gather and manage data.

Roman naturalist and philosopher Pliny the Elder once said "The master's eye is the best fertilizer." If expertise and knowledge are truly the best paths to growth, and if that’s true in farming, then what must the master know? What information must the master have? Thankfully, modern technology means we have proxy eyes all across our farm operations. Does that naturally mean, since we can see more, we know more? That depends.

For many of us, the first quarter of the year is planning and preparing time. It’s time for us to review last year’s financial reports, analyze our position, strategize, and set goals. We consider how we can, over the next year, make better use of our resources, cut costs, gather better data, and, most importantly, grow. 

The Farm Financial Standards Council has recently releasedFinancial Guidelines for Agriculture: An Implementation Guide for Non-Accountants. Not every farm or ranch operation has an accountant on hand or the accounting knowledge to take advantage of the ways financial reporting and data can revolutionize the way you make decisions, and, more importantly, grow. In recognition of that gap, the guidelines seek to help farmers and non-accounts gather the needed financial information, analyze it, and put it to use as decision support.In support of that effort, we think it equally valuable to understand who the council is and why this information is so vital to your farm business.

Quick Links

"It's not what people don't know that hurts them. It's what they do know that just ain't so."  -Will Rogers

For many farm managers, especially on smaller farms, farm management is a hands-on endeavor. It’s in the barn or in the field and assessing the situation on the ground, making decisions based on what they can see. However, there’s so much more data available for modern farms.

Information, from a variety of sources, both internal and external, can help you make strategic decisions and increase profitability. We’ve talked about farm management information and the three levels of farm information from a higher level, but in this blog, we’ll dig a little deeper and look at the kinds of information available to you and how to leverage it.

Quick Links

For a long time, in the agricultural sector, technology, beyond farm equipment, was relegated to the back office. Thankfully, farms don’t operate that way anymore. In fact, most have learned to leverage ag tech to assist in improving productivity and profitability.

’Tis the season to toil over financial statements. For nearly every business, the end of the year signals not just end of Q4 reporting but also end of year reporting. For farms and ranches, financial reporting can be complicated. Converting cash-basis accounting records to “adjusted accrual” financial statements and preparing financial reports based on a hybrid model can be complex, but it doesn’t have to be. Still, understanding the options and challenges is essential for anyone undertaking farm financial reporting tasks.  

When it comes to farm oversight, understanding where you are, in terms of financial information and accounting is vital. Growth Path Accounting starts with asking where you are now and what your information goals are. Growth Path Accounting can be narrowed down to three objectives:

• Leveraging the technology available to you through software and applications
• Learning advanced accounting skills at your own pace  
• Preparing you and your operation for future expansion to integrated farm records
  
  

To get there, you first need to understand Growth Path accounting and all of its separate parts. That informs not just your understanding of where you are and which accounting method you’re currently using, but also where you’d like to be and the advantages of the other accounting methods available to you.

Farming is about growth. It’s the primary focus from crop and livestock to the back office. Crops don’t grow from seed without external factors, nor does livestock. So how can we hope for our overall farm or ranch operation to grow without considering all the growth factors that allow the business side to thrive or wither?

And, when we see a challenge or opportunity to address a production shortfall, we look at all the options on the table. The growth path decision tree applied to farm accounting allows us to do the same. We look at the accounting decisions that impact our decision making process and assess how we can use accounting methods to improve our operations and profitability.

As a farmer, your day is filled with tasks. As a farm manager, your day is filled with decisions. From small to large, every decision you make will impact current and future operations. While a farm ERP solution helps you gather the data you need to make those decisions, you’re still left with options on when and how you implement it. It’s one reason we suggest creating a growth path decision tree, even when it comes to accounting. Each decision leads to more decisions and different outcomes. So, understanding the accounting implementations options before you, and the ways those decisions can impact your growth, is important.

The world population continues to grow putting more and more pressure on not just natural resources but food production as well. Farmers and ranchers must find ways to meet those demands while still meeting their own goals for growth and success. Thankfully, there’s much more available, in the world of ag tech, to help you do both.

The agricultural community is notoriously slow to adopt new technologies. While it’s easy to see yourself putting off that autonomous tractor for a while, there are an abundance of ag tech opportunities out there for farms and ranches, both small and large, to be leveraging to improve productivity and profitability.

Quick Links

There may be a lot of things that happen on the farm that present challenges, but for a lot of farms, nothing compares to the challenges faced in the back office. While creativity and ingenuity are great assets in the field and barn, the back office requires a different approach. For example, when it comes to applying general accounting principles to an industry that doesn’t necessarily function on other standard business principles, finding a balance between ingenuity and innovation and the right tools, solutions for back office and farm accounting problems are available.

Assets on the farm have value, but so does versatility. For decades, engineers have tried to find ways to increase the versatility of farm equipment and versatile products with multiple markets often reign supreme. Similarly, versatile team members who can move from task to task and handle a wide variety of responsibilities are coveted. The same should be true for your ag tech, specifically, the farm accounting software you use.

There are quite a few aspects of farming that are unpredictable. The best we can do is be prepared and ride out those challenges. We’re used to situations and plans that need to evolve. We’re used to being responsive. Similarly, as farmers, we’re used to production and marketing cycles. They dictate just about everything we do from planting and harvesting to breeding and market. The advantage with those cycles is they’re predictable. Accounting for those cycles, however, is a different beast.

While pastoral images and pictures of farmland often suggest a kind of quiet peace, anyone who’s worked a farm or ranch knows that, most days, it’s far from tranquil; there are just so many moving parts. At any given moment, one might be pulled in a different direction to handle evolving situations or address pressing needs.

But, what if there was a tool to help manage all those moving parts, including outside vendors and suppliers, ensuring that supply needs are met in a way that saves both time and money? Farm ERP software is designed to do just that, including helping with vendor management.

Prior to the arrival of drones, farmers relied on aerial footage from manned aircraft or satellite images to provide a valuable view from above when it comes to their fields and land. In the 1980s, drones or unmanned aerial vehicles (UAVs) appeared on the scene, but they still weren’t  cost-effective for most farmers.

Today, no one underestimates the value of drones in farming. Even that technology has grown exponentially and farmers are learning how to leverage it to improve their operations. Still, all the data in the world can’t help with farm management if there’s no way to aggregate and organize it in a way that delivers the insights you need to plan.

That’s where ERP software comes in. While it’s been in existence for quite some time, advances have provided significant improvements in agricultural ERP software that, much like a drone, can provide a comprehensive and detailed view from above for your farm operations.

Every February, farmers and ranchers from across the country gather at the National Farm Machinery Show which showcases cutting edge farm equipment and machinery to improve farm performance and help you get the job done. What you will rarely find at a show like that, though it’s equally important, is farm accounting software. Both machinery and ERP Software for the farm  have the power to pave the way for farm growth and success. Understanding how to leverage farm accounting to ensure efficiency and accuracy may just come down to how you use the tools you have at your disposal.