12—Lancaster Farming, Saturday, April 1, 1972
From local Act Teachers:
Editor’s Note: The article this
week was prepared by Charles
Ackley, Young Farmer advisor
at Ephrata Area High School.
Managing the Farm Business
The financial records of the
1971 farm business have been
summarized and most of the
farm tax returns filed by this
time.
A good set of complete records
are far too valuable to be used
only for filing a farm tax return.
Actually, the farm tax return
should only be a by-product of a
good set of financial records The
main purpose of these records
along with records of production,
inventory and credit should be for
analysis of the farm business and
managment planning. .
Records
There are several methods by
which a farmer can finish the
years business with a good set of
financial records. Some are very
basic while others are very
detailed. Some are computerized'
printouts performed by a record
keeping service while other
require much pencil and paper
work on the part of the farmer.
Granted, a person can leam a
great deal about his business
operation by spending hours of
time summarizing his records.
Perhaps the time may be better
spent analyzing the results and
allowing the computer to make
an accurate summary in a
matter of seconds.
Basic record keeping systems
may range from the “shoe-box”
to the Pennsylvania Farm Ac
count Record book designed by
Penn State University. Ihere are
also many other good record
books available at stationery
stores, banks and local
agricultural businesses.
More elaborate record keeping
systems that have analysis
services and computerized’
results inlcude the Pennsylvania
Agricultural Records program
by Penn State University and
Farm Managment Business
Analysis service by the Penn
sylvania Farmers Association.
Similar programs and services
are also available to farmers
Thoughts
in Passing
Charles Ackley
Young Farmer Instructor
Ephrata Area High School
through
some
cooperatives and banks.
Contact the local agriculture
teacher for more details on how
to get involved in one of these
programs or obtain more in
formation. Many of the school
districts in Lancaster County
have an adult farmer program
and the agriculture teacher will
be happy to share this in
formation with you.
Farm Business Analysis
The primary objectives of a
farm business analysis are to
analyze the financial structure
and production efficiency of the
farm. These help the farmer to
measure the financial health of
his business and to determine
possible weaknesses in
production and management. A
farm business analysis is useful
in obtaining credit and in plan
ning to use capital more wisely.
Properly used, a business
analysis is a tool in solving
managment problems.
Several factors affect farm
income. They are weather and
prices, size of business, return on
investment, efficiency, labor,
and production. Some of these
factors can be controlled and
others are outside the farmer’s
control. The farmer has prac
tically no control over weather
and prices, however his
managment decisions will in
fluence the other items.
Size of business affects the
other factors and is one of the
most important factors deter
mining returns. ’ A very small
business that does not make
efficient use of labor,
management, capital, and
equipment will yield a low net
income.
Likewise, a business that is too
large to be properly management
or other limiting factors will also
leave the farmer with a low net
income.
The ideal size business is one
that will make the most efficient
use of land, labor, capital,
machinery and managment
abilities. Financial records, tax
returns, inventory and credit
records, and production records
can be used to measure ef
ficiency.
farmer
Efficiency is measured and the
business is analyzed according to
family labor and managment
income, net worth, capital tur
nover, cash flow, return on in
vestment, income per hour and
value of farm products sold per
man to mention a few.
Analysis can be divided into
several categories. They are
capital, labor, livestock and feed,
crop and machinery. Eadi item
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must be analyzed individually as These are common questions
well as in total. that must be answered before an
Farm Mangement Planning analysis can be of any beneficial
What can you do with an value,
analysis? How is it interpreted? (Continued on Page 13)
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