Opportunity Accounting comes to the "Fat Farm," Depreciation as a management tool, February free webinars
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 FarmSMART                                                   January 2016 

In this Issue:

Opportunity Accounting Meets the "Fat Farm"

Depreciation as a Management Tool

FBS Users in the New

February Webinars

Winter Trade Shows

Refer>Rewards>Results Offer

In Loving Memory of Dr. Dan

Q&A:  New Year Bank Balance 

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 Dear 
Friend

This is the traditional season for farmers to prospect for their favorite color of "big iron" at indoor trade shows. From what we've experienced so far on the meeting circuit this may be the year that "hardware" loses some of its luster as software becomes a bigger draw.

While we're in the software business we don't see this as an either/or battle; in fact, this month we'll cover how software can be used to effectively manage hardware

  • Opportunity Accounting comes to the "fat farm."
  • Depreciation as a management tool.
  • FBS users in the news.
  • February free webinar schedule.
  • Link to recorded webinars.
  • Winter trade show schedule.
  • Refer>Rewards>Results offer.
  • In loving memory of "Dr. Dan."
  • New year bank balance.                                                                                                                                                                                                                                                                    SDG

 


 

A_bloated_bin.jpgOpportunity Accounting Comes to the "Fat Farm"

January marks not only the new calendar year but also the annual cycle of those New Year's resolutions to shed unsightly pounds.  With most of agriculture mired in the trough of a long-term market cycle, cost control has become the “diet of the month” for potentially-bloated farming operations.  But which costs represent fat and which muscle
  • Rents?
  • Inputs?
  • Equipment?
  • Labor?
  • Overhead?

What’s the best way to determine where inefficiencies are occurring or opportunities are going unrewarded?  While you can mimic other farmers’ cost-cutting strategies (just like you did their spending habits when the market was going up) your business structure and resources are as unique, complex and variable as your soils.  For example, reducing direct input costs by lowering rates or quality doesn’t necessarily result in corresponding direct savings to your bottom line.  And indirect costs are hard to trace and accurately allocate between farms, crops and activities.

Therefore, determining the opportunity cost for each alternative strategy is an objective exercise for evaluating cures that could likely “hurt” as much as they help.   Opportunity costs are an economic concept for evaluating the trade-offs between alternatives and help answer the nagging  “shoulda-coulda-woulda” questions.   

Some agricultural opportunity costs are easy to estimate, particularly those tied to production coefficients.  For instance, reducing energy in a feed diet will reduce ration costs, but will slow average daily gain by a predictable factor, which in turn will increase the cost of days on feed and ability to meet delivery schedules.  The results from reduced fertilizer and seeding rates, while not as predictable as feed responses, have similar outcomes and tradeoffs.

The process gets much murkier when evaluating changes that affect indirect and/or fixed costs, such as keeping versus “rolling” new machinery every year.  Cash payments and annual depreciation may go down, and repairs will likely go up.   Meanwhile you may also have dropped or picked up a farm or two, affecting the acres that you are spreading fixed costs against. 

Once you start tweaking assumptions and allocations beyond direct costs you’ll discover your operation is made up of many related “moving parts” that defy “quick and dirty” spreadsheet analysis.  If your plans involve changing or reallocating numerators (dollars) as well as denominators (acres, hours, machinery capacity) then you’ll be playing an Excel version of “Whack-A-Mole” as new costs pop up in one cell as you push expenses down in another.

The biggest limitation of this cost control strategy, however, has to do with your assumptionsIf you don’t already have a good handle on the unique mix of fixed and variable costs going on within each activity in your operation you won’t know which process are lean and efficient and which could be the “biggest losers.”

That’s why we’re launching a new series entitled “Opportunity Accounting” to help you better understand, evaluate and control  what’s happening within your business.


Depreciation as a Management Tool
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Mike Boggs, FBS Professional Services Director
 
Most of our FBS customers receive an annual depreciation schedule from their tax accountant when they meet for year-end tax planning, but very few are maintaining their own schedules. 

Are you recording tax depreciation in FBS?  This should be one of your year-end entries posted to each asset to determine overall costs to operate these assets.  With Section 179 deductions being so large, most of your tax depreciation is taken in the year the asset was acquired. 

Do you have a need/desire to track your book depreciation separately from tax? FBS has been testing CenterPoint’s Depreciation software and we are happy to say this module will provide you the asset tracking necessary to maintain a tax, book, and market value depreciation schedules.  The system will allow the user to input an unlimited number of assets.  It will also handle disposals and trades on each asset which we found useful in maintaining the history of an asset. 

Another useful feature is the ability to purchase multiples of an asset but only need to enter it once into the system.  A common example in agriculture is purchased breeding stock.  With CenterPoint you can specify the total quantity of animals purchased together but can dispose of them individually.  Also, each asset can be set up and matched to your FBS cost/profit center for easy cost allocation in FBS, including E.CLIPSE Management Accounting.

With proper setup, you will be able to export monthly, quarterly, or yearly journal entries and import into FBS using our optional Import/Export module.  Many reports are available along with ability to run 5 year depreciation projections.  If this is something that is of interest to you, please feel free to reach out to our sales team to obtain pricing and costs to convert your current data.

For more information, contact sales@fbssystems.com or call 800.437.7638 / Extension 2.


FBS Users In the News

This month we begin by saluting some of our exceptional pork producer clients.

Derrick Sleezer, Aurelia, Iowa, is serving as National Pork Board President.

Successful Farming Magazine recognized these FBS clients in their U.S. Pork Powehouses 2015:

  • Eichelberger Farms
  • Carthage System
  • Schwartz Farms
  • Wakefield Pork
  • Hord Livestock Company
  • J.C. Howard Farms
  • Dykhuis Farms
On the crop side, FBS user and Indiana Farm Bureau President Don Villwock shares how he's reducing seeding rates as a cost-cutting strategy in the 2015 Marketing issue of Successful Farming.
 

February Free Webinars

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February  1:  Clearing checks and deposits.
February  8:  Using input and report macros.
February 15: Finding errors and out-of-balance entries.
February 22: Ledger accounts.
February 29: Report parameter basics.

All webinars run between 1:00 pm and 2:00 pm CST.   

To register, e-mail support@fbssystems.com by 12:00 pm CDT on the day of the webinar.
 
NEW:  Catch up on the webinars you've missed by watching them on the Webinar page of our website.

 
Winter Trade Show Schedule
Event Location Dates Booth #
Iowa_Pork_Congress.jpg Iowa Events Center
Des Moines
January 27-28 204
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 Kentucky Exposition Center
Louisville, Kentucky
February 10-13   1009
West Hall
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Prairie Capital Convention Center
Springfield, Illinois 

February 16-17  105 
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Morial Convention Center
New Orleans, Louisiana 
 March 3-5 1006 
 
Click on the event logo to go to that organization's website.

Refer>Rewards>Results Offer
We really appreciate your business!  Do you appreciate (or even love!) what FBS does for you enough to share your experiences with a friend or neighbor?  All they have to do is complete a web demo with us, and you'll receive two hours of free consultation by Michael Boggs, FBS's Director of Professional Services or $200 off a new FBS module of your choice.

This offer is valid through February 29, 2016. Tell your referral to call 800-437-7638 or email sales@fbssystems.com and mention you or fill out the form at http://www.fbssystems.com/schedule_a_live_demo and put your name in the questions box.


In Loving Memory of "Dr. Dan"Dan_Cake.jpg
Last month we recognized the accomplishments of Dan Swinderman, who retired after serving as FBS's senior programmer since 1981.  With deep sorrow we share the news that Dan passed away early this month.  He'll be dearly missed by his biological family and his FBS "family."  If you knew Dan or just appreciate his work crafting much of our software for 34 years, please send your thoughts, memories and words of encouragement to norm@fbssystems.com, and we'll pass them on to the family.
 
You can watch a YouTube tribute to Dan featuring this favorite band, Captain Stubby and the Buccaneers.  Read more about "Dr. Dan" and his successor, "Dr. Martin," in the December issue of FarmSmart.
 
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Former FBS employees Gary Simpson, Rex Johnson and Tom Harlan (far right) join Sales Manager Doug Ball in honoring Dan.
 

Q&A of the Month: New Year Bank Balance
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Sarah Dixon, FBS Sales and Support Coordinator

Q.  When I roll over into the new year my bank account balance does not match the ending bank balance in the previous year.  What's going on?

A.  This is a common issue, but is very easy to track down.  It’s usually due to one of two things:  1) There’s either an uncleared check or deposit beyond your cleared look back months or 2) you have an undefined entry

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To search for an uncleared check or deposit its helpful to be aware of your “Cleared Look Back Month” setting.  The default setting is 4 months, but you can change that preference to up to 12 months.  This can be found under Utilities>Set Preferences.  Find the line named Cleared Look Back Months and check the value.   If it’s blank you are using the default 4 months

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 Now go to Input> Clear Checks and Deposits set the Beginning Date within your look-back period; so if it’s now January and you are using the default 4-month setting run the Clear routine for 09/01/2015 through 10/15/2015 to see if there are any uncleared checks and deposits in September or early October that need to be cleaned up.  If you find transactions you expect to clear in the new year then you need to set the value in Preferences for something greater than 4.  However, if you can’t find any uncleared entries then there is something else to try.

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The next step is to run an Accounting User Defined Report for the entire prior year and check the box to print Undefined Entries.  This will bring up any entries with errors relating to the ledger, center or division or out-of-balance entries.    Any entries that come up on this report need to be fixed.  The most likely cause for errors is from a deleted ledger, center or division.  (Reminder:  NEVER DELETE, ALWAYS INACTIVATE).  Right-click on the entry and make all lines correct; once the lines are all correct the "Amt to balance" will be zero and you can save the entry. 

When all errors are cleaned up you will need to log into the new input year and go to Utilities>Recreate Beginning Balances.  Run your report and your balances should again match the ending balance from the previous year!

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