In this Issue:

Prescription Farming for Your Financial Records Part II 

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 growingcomplexity of farming operations requires the same core decision-making processes to select, implement and grow an accounting system. 

The Assumptions Behind Growth Path Accounting 

1. Each farmer's background is unique. Most have little personal experience with sophisticated accounting practices.
2. Each farmer's goals are unique and constantly changing.
3. Farmer-accessible education and training in accounting and financial management is both scarce and expensive.
4. Systems Development can pinpoint where the farmer is today (A) and determine where he needs to go (B) But it also requires professional guidance and training to implement while providing no guarantees for ultimate success (see Figure 1).

Figure 1.

While based loosely on the concepts of systems development, Growth Path Accounting offers three significant benefits: a simpler process, faster adoption and reduced risks.   

• Instead of forcing the farmer to select among an infinite combination of possibilities, he chooses between three predefined accounting systems.
• Since Growth Path Accounting encourages the farmer to begin at an accounting level he already understands as well as provides an organized framework for record-keeping, new computer users can get off to a much faster start.
• Finally, because a "growth path" is open between each of the three accounting methods, the possibilities of getting "stuck" in a program that is either inadequate or too complicated are virtually eliminated. (See Figure 2.) This flexibility in turn, makes the system selection process much less critical.

Figure 2.

The major caveat to this method is the software. Obviously, several options must be available within one program or family of programs. The "path" must be well-documented and procedures established to move the user from one module to another as the need arises. 

For farmers to move beyond "computerized checkbooks," both the fear of failure and lack of education hurdles must be crossed. Both the Systems Development and Growth Path Accounting processes can provide tailored solutions to meet your needs. The first method depends on the judgment of a trained expert; the second is a "DIY" approach
.
We'll cover the specifics of the "growth path" procedures in the next issue. 

Earn Your Financial Stripes  

 "When the going gets tough, the tough start crunching--numbers." 

That's the theme of the Mid-January Farm Futures Magazine.  

• 55% use a cash accounting system strictly for tax purposes.
• 17% use a cash accounting system that allows accrual adjustments.
• 7% use an accrual system for taxes.
• 11% use an enterprise accounting system that allows tracking of different crops and livestock operations.
• 10% use managerial accounting that allows tracking of individual cost and profit centers. 

 Among the business practices they expect to change in 2014:

• 6% will create standard operating procedures (SOPs).  
• 8% will upgrade their accounting system.
• 14% will start benchmarking their farm against past production and financial performance.
• 20% will update financial records monthly.
• 37% will start calculating cost of production and recalculate as needed throughout the year.  

They are also adapting to these trends:

• 85% expect prices for 2014 crops will be lower than in 2013.
• 35% need a better way to determine which enterprises are most profitable.
• 30% can afford to hire more bookkeeping expertise now toupgrade their accounting system.
• 8% believe their farm is too complex for the accounting system they traditionally use.
• 4% say their accountant recommends they switch to a new accounting system.

Other financial practices adopted by high-profit farmers according to consultant Dick Wittman:

• Monitored cash flow budgets.
• Enterprise/cost center tracking.
• Audit systems to ensure financial statements reconcile to inventories, and other assets and liabilities.   

We invite your to write sales@fbssystems.com or call 800.437.7638 to learn how we can help you "earn your stripes" with FBS Software and training. 

Sarah Dixon, FBS Technical Services Manager.

Q.   Why does my ending bank account balance on 1/31/14 not match mybeginning bank balance on 2/1/14?

A.  This can happen if you have an uncleared check prior to your cleared check look back months.   The system's default setting is to look back 4 months, but you can easily adjust this to fit unique situations through the Set Preferencesscreen under Utilities.  (See screen shot below.)  

Changing Cleared Look Back to 6 Months.

If you've never set that preference then TransAction Plus will only look back 4 months to compute the uncleared checks balances in the Check Register Report. As a result any checks left uncleared for more than 4 months will drop out of the balance.   

To verify that this is the problem go to Input | Clear Checks and Deposits and set the beginning date for 1/1/2013 to search for any uncleared checks or deposits any time in the prior year. Do your research and clear up the entry.  If it is still an outstanding check but you do expect it to be cashed at some point then change your Look Back Months in the Preference screen.  (The only trade-off for specifying more than 4 months for the Look Back period is slower report speed.)  

Your bank balance might also be off due to an unbalanced entry or entry error. So if you don't find an uncleared entry try running the Accounting User Defined Report with the box checked to Check for Undefined Entries and clean up any entries that show up in that report.