In this Issue:

 Dear Friend,

See answers at the end of this newsletter.

Opportunity Accounting Sub Classification #1

Last month we identified the major responsibility centers in a typical farming operation:  cost centers, profit centers, revenue centers and investment centers.   In this issue we will “drill into” sub classification of these centers in order to provide management better clarity and control.

Sub Classification #1:  Production Stage

Agricultural production is very similar to the manufacturing process in several ways. 

First, it involves the conversion of raw materials (seed/feed) into work-in-process (growing plants or animals) and finally into finished goods (harvested crops or animals).  Relating back to last month’s article on centers, work-in-process are cost centers while finished goods are profit centers. (Raw materials are simply inventory items on the balance sheet.)

Second, work-in-process is generally composed of distinct stages in which products can be managed, valued and transferred.

The Farm Financial Standards Council’s Management Accounting Guidelines describes it this way:

What is to be costed must be clearly understood. While a single “thing” may sound as if it is costed and management may wish to know the ultimate cost of a finished product, many processes, phases, production stages, and activities (both production and non-production as well as operational and capital in nature) will be measured along the way.

For example, the pork industry has aligned itself in 5-6 stages* of production:

• Boar studs
• Replacement gilts
• Sow herds
• Nurseries
• Finishers

Each production stage produces an interim product which can be either sold or transferred to the next stage.  Therefore it’s vital that managers know their actual costs and compare them against their market value at each production stage in order to determine their competitive position and determine costs of sales of the final production stage.

Similarly the beef cattle industry is segmented by cow-calf, stockers/backgrounders and feedlot stages.

Are there comparable stages in crop production?   In the early days of the Farm Financial Standards Management Accounting committee there was an attempt to identify the common production stages across every crop.  They came up with the following "lowest common denominators:"

• Planting
• Growing
• Harvesting
• Processing

Since then the Growing stage has been expanded to included primary and secondary tillage, fertilizer applications and pesticide spraying.  However, while each of these processes adds value to the work-in-process inventories there are no logical sales or transfer points until harvest occurs. It’s not that identifying  and managing these costs is not important; it’s just that they usually are incurred concurrently instead of the linear flow of costs between each livestock feeding stage.  

Defining standardized production stages within your operation will permit you to benchmark your competitive standing within your industry as well as better understand your opportunities for improvement.

* The nursery and finishing stage are being consolidated into a single wean-to-finish stage on many farms.

For more information on responsibility centers download the Farm Financial Standards Management Guidelines.  Next month we'll cover additional sub classifications of management segments.

FBS Users in the News
Congratulations to these pork producers who made the 2016 Successful Farming Pork Powerhouses list:

• Carthage System
• Eichelberger Farms
• Hord Livestock Company
• J.C. Howard Farms
• Schwartz Farms
• Wakefield Pork

December Free Webinars

December 12:  Pork Dashboard.
December 19:  What reports to run for your accountant.
December 26:  1099s.

Q&A of the Month:  Installing Version 11

Sarah Dixon, FBS Sales and Support Coordinator

Some questions keep popping up about our new version 11.01 upgrade so I would like to go over some of the more common ones.  If you still have any questions or concerns please don’t hesitate to call or email support!

Q.  What is different with this version, what should I expect to see different?

A.  There are several things that have changed with this version.  Most of which are behind the scenes and you won’t notice any difference.  We changed to a Microsoft Jet 4.0 database, which does require a data conversion.  This change will pave the way for some great things in the future for FBS.  Some report speed issues have also been addressed.

Q.  Do I have to have the 8.16 version installed before I install the version 11?

A.   Usually we would say no, but with this release it is actually encouraged!  If you are still on version 8.15 or earlier then first install version 8.16 and then version 11.01.  

Q.  When I try to install it is not asking me where to install the program like it has in the past.

A. This is correct.  If FBS is already installed on your computer the new installer will find the last place you installed FBS and install it in the same directory.  This has been done so you don’t have to remember where your program was previously installed!  It also means that if you are installing on a server you must have the install CD in the server computer

Q. The folder where it installed the version 11 still says FBSWIN81, so does that mean it didn’t install?

Version 11 Home Screen

A. If the FBS home screen displays a flow chart and says “Version 11.01” across the top will you have successfully installed the upgrade.  But the program file folder will not change names.