Farm Management Software Blog

Farm Financial Management: Know Before You Grow

Posted by Norman Brown on Wed, Apr 25, 2012 @ 04:48 PM

 

Know Before You Grow

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

                                                                                                      Will Rogers

At least that’s what some people believe.   Others are just as sure this quote came from Mark Twain.  (Unintentionally, Will/Mark's collective wisdom is validated.)

What about you?  Are you preparing to make critical management decisions based on intuition, past experiences, or what your neighbors are doing rather than based on objective data?   You’re not alone.  We’re convinced a majority of producers begin with erroneous assumptions, then bolster them with sloppy business practices.   (Of course, we could always be proven wrong!)

External Knowledge

If there’s any lesson to be learned from the past few months it’s that no market or weather assumption is too outlandish or unlikely.  While we’re not aware of any risk-management service that has precisely predicted all the "black swans" we’ve experienced, these organizations—as compared with the sages at the “coffee shop”—provide valuable expertise and perspective in help you cope with the uncertainties of the external world.

Internal Knowledge

Most of FBS’s technology and services, though, are concentrated on measuring and managing the internal business processes of farming operations.  That creates these challenges:

  1. Outside of very general mandatory reporting, nobody “makes” you follow sound business practices.

  2. Few standards are widely available for categorizing, prioritizing, benchmarking and making objective decisions from internal farm data.

  3. Most of the record-keeping/accounting tools used on-farm are way too generic and/or clumsy to generate useful and timely management information.

  4. The accounting education and training delivered through traditional sources such as the Extension Service are lagging the needs of modern agriculture.

  5. Many progressive farm businesses have grown to levels of complexity that can’t be easily managed using conventional tools and practices.

  6. While the best-managed operations do generate good-quality information, it’s rarely available quickly enough to make timely, quality decisions.

  7. A majority of farmers rely on someone else’s cost assumptions rather than their own numbers.

  8. Quality control (and the entire validity of data) is hit-and-miss.

Throughout the next few posts we’ll be puncturing myths and challenging your assumptions about your accounting and business practices.  While the process may be painful, the results will help you know as well as grow.

“An ignorant person is one who doesn't know what you have just found out.”

                                                                 Will Rogers (we think)

Tags: farm financial reporting, best practices, Farm Financial Standards, quickbooks, FBS Systems