Farm Management Software Blog

Successful Farm Management Accounting

Posted by Norman Brown on Wed, Sep 14, 2011 @ 04:59 PM

 Management Accounting Example

A few years ago the Farm Financial Standards Council--which promotes the introduction and standardization of management accounting (M.A.) within agriculture--asked software company providing M.A. to respond to these questions:

1.  Who's the target audience for management accounting?
2.  Who's not the target audience?
3.  What are the prerequisites for success?
4.  What specific benefits are farmers achieving from M.A.?
5.  What are the opportunities for partnering with professional financial service providers?

Here are the responses to the first three questions:

1. Who can benefit from Management Accounting?

Although any operation can technically benefit from knowing and managing costs, not everyone is ready for M.A.  The early adopters all share one or more of these characteristics:

  • Strong management focus

  • Well-defined management segments and specialized responsibilities

  • Tend to be "splitters" rather than "lumpers"

  • Already familiar with M.A.

  • Require monthly or quarterly financial reporting

  • Have reached a plateau due to the limitations of the traditional "adjusted accrual" approach and/or "generic" accounting packages like Quickbooks, MAS 90, Great Plains, etc.

  • Larger operations ($2 million in sales and above) are logical (but not exclusive) candidates

2. How do you know you're not a candidate for M.A.?

  • You place a low priority and value on management information

  • You don't like structure and accounting standards

  • You're not going to use the knowledge to make decisions

  • You're impatient (everyone agrees the "end result" requires at least two years since each season / production cycle takes time and requires adjustments and refinements)

E.CLIPSE Managerial Accounting for Agriculture

3. What are the prerequisites for success?

  • Internal controller and/or MIS "champion"

  • Awareness and appreciation for management accounting

  • Active involvement by accountant or financial consultant

  • Strong "information culture"

  • Inventory control (the greatest limiting factor in any level of farm records)

  • Timeliness

  • Delegation

  • Commitment to continuous improvement

In upcoming posts we'll review some of the (unexpected) benefits that farmers are discovering from M.A., as well as some exciting opportunities to partner with financial professionals.

FBS Systems, Inc. added activity-based management accounting to its integrated farm management suite in 2001.

Click the button below to learn more how management accounting works for agriculture.

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Tags: managerial accounting, farm management accounting, cost accounting, quickbooks, activity-based costing, farm financial standards council, farm accountant