Farm Management Software Blog

Connecting the Three Levels of Farm Management Information

Posted by Norman Brown on Mon, Feb 25, 2013 @ 06:49 PM

Mountain Peaks resized 600

In the past three issues of this series we’ve used a mountain range metaphor to depict the relationship between three levels of computer applications—decision support, compliance and business processes.

The graphic above populates this vertical-horizontal information landscape with some real-life examples.  Compliance is the lowest level (foothills), business processes are the mountain trails and decision support is in the clouds at the summit.  Note the more difficult (and valuable) the business processes, the higher the elevation represented on this chart.  Furthermore, the time interval required to complete processes and reports increases as you move from left to right. 

Use this chart to plot your current level of adoption of these crucial business processes and decision support systems.  Although the Internet and Global Positioning System have made real-time market and agronomic production data widely-accessible literally through the “clouds,” most producers are still plodding along at the compliance level.

What are the major barriers preventing serious managers—like you—from ascending beyond basic compliance (or even business process) activities and reaching the decision support summit?

1.  Note that all activities below the mountain tops are considered cost centers, while decision support (where the real payoff occurs) is the profit center.  With cost centers there are no compelling rewards for performing compliance and business processes; just penalties for not doing them in a timely and accurate manner.*    Also, by definition, a cost center is a means to an end (supporting a profit center) that consumes significant costs with little direct returns.

2.  The most conscientious firms often get bogged down at the compliance level without ever reaching functioning business processes.  And even the best companies can be stranded at the business process level without achieving effective decision support.

3. Assuming a firm is willing and able to commit the resources to stay on top of all their compliance and business processes chores, it’s unlikely that the resulting information can generated in a timely enough manner for quality decision support.

 Is there a safe, sane route to the top?  Fortunately, as we’ll see in the next issue, other industries have already blazed this trail for agriculture. 

* Unlike the known penalties associated with compliance failures, the costs of business process failures are usually masked by the lax business processes themselves.

Tags: farm management accounting, cost accounting, accrual accounting, farm financial reporting, agricultural managerial accounting, farm inventories, farm software, agricultural decision support, agricultural software, enterprise analysis, farm budgeting, Cost center allocation, agricultural inventories, farm benchmarks, farm cost centers, farm profit centers