E36-Lancaster Fanning, Saturday, August 13, 1988 BY ROLAND P. FREUND Farm Management Agent In the day to day struggle to keep a business going it is often difficult to tell if any progress is being made. It is vital to take stock regularly and see if the operation was profitable or not. When year end books are closed off, tax returns are filed and the figures arc available it is a good time to check for progress. There are many ways to mea sure “success” some are useful and some can be quite misleading. It might seem that if the checkbook balance has improved that the bus iness is going well. Certainly, if there is never enough income to meet the expenses, then there is a problem. But just because there is an improvement in .the check balance it is not necessarily a sign that all is well. If borrowed money “saved the day” or if ignoring some obligations improved the dheck balance, then the business may not have improved. Maintain ing cash flow does not necessarily equate with profit. DID YOU HAVE TO PAY TAXES? The amount of taxes that need to he paid can give us a guide but it is not very reliable, particularly for the cash basis farmer. However, if a business consistendy pays little or no taxes it is not profitable (unless someone is doing some “constructive” accounting). It is important to look at some other measures to track what happened during the past 12 months. Pork Board Receives 1989 Checkoff Funding Proposal DES MOINES, lOWA The National Pork Board has set a Sep tember 6, 1988 deadline for receiv ing proposals for 1989 projects and programs to be funded by the 100% Checkoff Program. The 100% Checkoff Program is expected to raise $26 million in 1989 for use in pork promotion, research and consumer education. The proposals, according to Vir gil Roscndale, president of the National Pork Board, should address the priorities identified by 150 producers taking part in the Policy Development Groups in April. The Industry Operating Committee, composed of six pro ducer leaders, then developed spe cific program areas consistent with those priorities. Enhancing pork demand by improving consumer altitudes, increasing meatcase space and retail featuring of pork, and increasing the use of pork in restaurants and institutions are identified as top priority items by producers. Producers also cited increasing pork exports, develop ing new pork products and educat ing producers on the latest produc tion technology as projects that should receive producer checkoff funding. In addition, producers see the need for improving young peo ple’s altitudes towards pork and educating health professionals on the nutritional value of pork. The proposals will be reviewed by the National Pork Board in, October. ~ Is Your Farm Business WHAT DID THE PROFIT AND LOSS (INCOME) STATEMENT SHOW? It is necessary to adjust the cash figures as used in the tax returns for such things as changes in inventories and changes in unpaid or prepaid accounts to evaluate the operating success of the business. The figure that is produced is often not enough to cover the family liv ing expenses. Often people say, “That’s OK we live on the depreciation!” The problem is that depreciation is the only way that this statement reflects the cost of capital invest ments to the operation of the busi ness. If principle payments and cash purchases of capital items are already greater than depreciation, then that cannot be a source for family living. Unfortunately farm debt principle payments are often much greater than depreciation because land mortgage has to be paid, but land is never depreciable. So then family living comes either from borrowed money or from what should have been paid at the feed mill. WERE UNPAID BILLS REDUCED? This is the “blood pressure test” because the presence of any unpaid bills is a danger signal, but if the level continues to rise from one year to the next it could be “fatal.” Unpaid bills are ignored on a tax return and they may be conve niently overlooked in an analysis. But they should be watched very carefully and must be listed on a balance sheet. HAS OWNER’S EQUITY INCREASED? Unfortunately many people More information on making proposals is available through the National Pork Board office in Dcs Moines, lowa. only look at a balance sheet as something the bank requires when they look for more credit. It is probably the most important mea sure of business progress for a farm. Failure to prepare one annu ally and to compare equity from one year to the next is probably the reason why many businesses today find themselves at the end of the road. We see farms that were pur chased for less than $30,000 in the 3 Point Mower Pull Type Mower 4’, s’, 6’ and T Widths, Heavy Duty Mowers, 10 ga. Deck Reinforced With Angle and Flat Iron, 1/2” x 3” Blades On Round Pan Stump Jumper, 45 and 60 H.P. Gear Boxes < AUGUST SPECIAL! I u * tr tt^MATIC NORTH CENTRAL AG AUTOMATION R.D. #2 Box 90A Milton, PA 717-437-2031 GROFFDALB MACHINE CO. INC. 194 S. Groffdale Road Leola, PA 17540 (717) 656-7657 MANUFACTURERS OF ROTARY MOWERS AND DISKS One Set Of Knives 'x FREE ~7 w/Purchase of Mower Lock In Profits ZUG FARM & DAIRY EQUIPMENT Mifflintown, PA 717-463-2606 Making It? 1940’s or 50’s now obligated for well over $300,000. The operators borrowed out all the growth in equity on the properly and literally sold the farm back to the bank in order to continue to farm it. This kind of thing should not happen if managers are aware of the trend in equity level. Drought and adverse prices can from time to time result in drops in equity, but these should be temporary dips in an improving equity position. Unless equity is improving faster than inflation. ' S C* The Dari-Kool® Plate Cooler from BOU-MATIC® Protects the Quality You Put in Your Milk iven though you follow every recommendation for •reducing high quality milk, an inadequate cooling system can rob you of profits. A Dari-Kool Plate Cooler quickly and economically cools incoming milk, reducing bacterial growth and agitation damage. This means less risk of downgraded milk and income loss. ►tart protecting your milk and locking in irofits today. Ask your Bou-Matic dealer about the economical Dan-Kool Plate Cooler. h OOU MATIC and DARI KOOL are registered trademarks of M Iv., Dairy Equipment Company P O Box 8050 • Madison Wl 53708 BOUi JONES-DAIRY SERVICE Medford, NJ 609-267-0198 LANCASTER DAIRY FARM AUTOMATION Manhcim, PA 717-665-7300 OPTIONAL FEATURES • Floating Top Link Hitch On 3 Point Models • Constant Velocity Drive Shafts • Slip Clutches • Pull Type Mowers With Offset Hitches CUSTOM MADE DISKS 20 and 24 Blade Disks With 20” 7 ga. Disk Blades, Sealed Gang Bearing For Less Horsepower, With Or Without Seat and Platform Stop By The Bou-Motic Exhibit At Ag Progress Days, Loc.: W. sth St. W and J DAIRY SALES Oxford, PA 717-529-2569 there is no real progress IS YOU BUSINESS MAKING IT? If you look at the measures out lined above, and take stock of your situation, you should be able to tell how things arc going. If there is a temporary setback due to drought there is no cause for alarm, but if you are looking at a consistent and long term trend in the wrong direc tion, then there is little chance that things will reverse themselves without some very drastic action. DAIRYMEN, INC. Sykcsvillc, MD 301-549-2100 TRI-STATE FARM AUTOMATION Hagerstown, MD 301-790-3698
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