Analysis pays, too

Agriculture.com Staff 02/18/2008 @ 6:50pm

You wouldn't think that accounting could be controversial. To the layman, it sounds so dry. In reality, it's like every industry. It has rivalries. It has skeptics and doubters.

Managerial accounting, an attempt to apply industrial record keeping to farming and ranching, has its critics. I've heard from ag accounting software developers who were miffed that the stories Successful Farming magazine has run on this subject mention only three companies.

That's because only three have worked with the Farm Financial Standards Council to develop software that meets its guidelines for this type of accounting.

I see my job as peddling information and promoting ideas -- not products. Of course, you're going to need the right product, in this case software or accounting help, to put something like managerial accounting into practice.

But there are plenty of people in production agriculture who are still using enterprise accounting and cash accounting with accrual statements for their lenders. I think that most of you, too, will be long-term survivors in our industry. It's the folks still carrying around a notepad in a pocket and carting checks and receipts to their tax preparer once a year who worry me (unless, of course, they've collected farm program payments in Manhattan).

In short, doing something is better than nothing. And trying to leap from a shoebox to managerial accounting has its own risks -- of frustration if nothing else.

Try joining a farm business association or attending Farm Bureau or Extension sessions on improving record keeping and management. While times are good, you can afford it. When they're not, you'll be glad you did.

That's the basic point Charles Brown, Iowa Farm Bureau's business expert, makes. Even those who don't buy into managerial accounting completely can start to use its concept of cost centers, he says.

Good accounting and record keeping is important. In today's volatile ag economy, not having a system you like is like driving down a mountain road at night without headlights.

But just as good headlights won't tell you which way to turn, a clearer picture from accounting won't tell you how to change your business. That really gets into the area of economic analysis, not accounting.

You wouldn't think that accounting could be controversial. To the layman, it sounds so dry. In reality, it's like every industry. It has rivalries. It has skeptics and doubters.

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