A new frontier

Agriculture.com Staff 10/08/2007 @ 8:32pm

In 1989, a diverse group of ag leaders formed what became the Farm Financial Standards Council (www.ffsc.org). Since then, the group has published and updated Guidelines for Agricultural Producers that promote uniformity in financial statements and ratio analysis in agriculture.

More recently, the Council started a task force to embark on a major new initiative: developing standards for managerial accounting (MA) for agricultural producers. It spent more than five years doing research, writing discussion drafts, building case studies, hammering out implementation issues, and presenting results to producers and advisers. Three ag software firms -- Red Wing, FBS, and AgriSolutions -- helped by planning to use MA concepts in future software. Last December, the Council signed off on a national release of the new MA guidelines.

As a member of the task force, I presented many test exposures on MA to producer and accounting forums. For me, the most valuable benefit of MA is gaining a better understanding of what drives cost of production and being able to link financial analysis to strategies to improve financial performance.

At each exposure, I expected at least one person to step forward and say, "This is a bunch of hokeypokey (or stronger language)!" To the contrary, not once has there been such a negative response. A common reaction is, "I need to figure this out. And if I don't, I will be at a competitive disadvantage to those who have."

Another reaction after seeing a neighbor make a presentation on cost of production is, "I have no idea how I would get those numbers. And if I could, I'm not sure I'd want to know the answer!"

Council efforts to expose MA concepts have been aided a lot by articles in leading farm magazines. Each one has featured producers who benefited from applying MA concepts.

The Council is at a critical juncture. We're studying ways to train trainers and promote implementation. Obstacles to this are lack of educators with expertise to teach MA, lack of funding for education, and the costs of applying these concepts in a farm business.

The Council is excited about a significant cooperative educational effort with Successful Farming magazine and Asgrow that includes seminars in late January. Never in my 35-year professional career have I seen a time with such potential for volatility in price and cost of production. Getting a handle on MA -- the new frontier in farm management -- will be an essential skill to have in your toolbox to excel in the future.

Dick Wittman will show how MA works on real-world farms at:

  • Augustana College, Sioux Falls, South Dakota, January 28, 2008.
  • i wireless Center, Moline, Illinois, January 29, 2008.
  • Purdue Agriculture, West Lafayette, Indiana, January 30, 2008.

For details on times and locations, check back on this Web site or call 800/678-8386.

In 1989, a diverse group of ag leaders formed what became the Farm Financial Standards Council (www.ffsc.org). Since then, the group has published and updated Guidelines for Agricultural Producers that promote uniformity in financial statements and ratio analysis in agriculture.

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