In prior installments in this series, we covered the two key questions in the Growth Path Accounting Decision Tree.  This month we continue tracing the accounting results from these decisions.

In prior installments in this series, we covered the two key questions in the Growth Path Accounting Decision Tree.  This month we begin tracing the accounting results from these decisions.

 

Last month we reprised a series that was first published over 20 years ago documenting a proven process used by a generation of FBS users. While technology has advanced in quantum leaps, the growing complexity of farming operations requires the same core decision-making processes to select, implement and grow an accounting system.

The Assumptions Behind Growth Path Accounting 

Twenty Twenty-Five is the target date that Farm Journal Top Producer predicts for “ Fully Integrated Farm Records” in its Mid-November 2013 issue.
However, we believe most of the “goodies” envisioned in the article can be under your tree by 12/25 rather than 2025.

Here’s the real  state-of-the-art for integrated farm records:

1. Connecting production data directly with accounting software.  FBS already includes “tight and right” integration between production activities/inventories and accounting based on common definitions that simplify input and produce comprehensive reports.
   
   
2. Dozens of data silos.  Last month we touched on the 50 or so sources of data we can import from, including precision farming technology, feed mills, packers and Conservis apps.  Perhaps these diverse products will be more standardized in the years ahead through initiatives from organizations like AgGateway and informal market forces.
   
   
3. Converting production to accrual.  E.CLIPSE managerial accounting automatically converts activities to costs that flow from raw materials through work in process through finished goods on the balance sheet to cost of goods sold on the income statements.
   
   
4. More accurate equipment and labor records.  E.CLIPSE also performs activity-based-costing to monitor the resources consumed through each phase of production and match those costs with hours, acres, miles, bushels, pounds and head.
   
   
5. Electronic invoices.  Even though there’s little standardization yet in agribusiness FBS can already import invoices and sales receipts from a wide range of formats and transfer the management detail (quantities, groups, fields, products) as well as the dollars into the farm’s central accounting and management information system.
   
   
6. Smart data/measuring what you manage.   Rather than viewing accounting as a “rear-view” of a business used to determine historical “cost of production” for raised products (which are often affected by external factors like weather and disease), activity-based costing evaluates the efficiencies and margins of each responsibility center.
   
   
7. Virtual CFO.  Just as progressive, growing operations rely on internal specialization and outside consultants for production analysis they are also tapping into virtual CFOs and controllers who can remotely oversee the financial details of the business.
   
   
8. Google Glass.   OK.  Unlike the other technologies, most of us will have to wait a few more months before we find this “toy” in our stockings.

Two recent articles in the farm press validate how far farm management technology has come, yet how far it has yet to progress to make a serious business impact.

"The next generation of agricultural managers are asking how the industry can enable seamless data exchange between machines and Farm Management Information Systems.  The costs of exchanging data are high due to the lack of common implementation guidelines, data transfer protocols, message standards, and standard reference data.  Producers report that it is difficult or nearly impossible to move data from one system to another.  To do so almost always requires data reentry, manual data transformation, and/or specialists to manage data."

Chris Barron of Carson and Barron Farms and a columnist with Top Farmer Magazine, introduces encourages a proactive approach to farm margin management in the recent article, Financial Fitness for Tomorrow.

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.