IT TAKES TWO EYES TO MANAGE A BUSINESS Roland P. Freund Extension Farm Management Agent Forty years ago farmers were able to keep about 40 cents out of each dollar of farm Income for family living and capital pur chases. At that time, most of them could make a living and maintain the farm without wor rying about fine-tuning any thing in their business. Today, on many of our farms, that margin has dropped to about 20 cents on the dollar. This means that it does not take many mistakes and the family is fresh out of bread money. This situation is not unique to agriculture. We are in a more competitive world where all business managers must plan very carefully to even survive. One-Eye Approaches A “right-eye approach” to this problem is to pay lots of at tention to the expense side of the business. The “economizers” among us will scrimp and scrape on costs in the belief that “a penny saved is a penny made.” Unfortunately, this often results in starving “the goose that lays the golden egg.” Even a blind person could quickly identify a symptom of this syndrome when CF she runs her hands over the pro truding bones of the cows. The “left-eye approach” is to concentrate all the attention on producing one’s way out of trou ble. In the past, this strategy has been very successful for some. Unfortunately, it often results in pouring more inputs particu larly grain concentrates and the latest and greatest additives into cows to the point where re turns are actually diminished. In a dairy, this can manifests itself through acidosis, lameness, and ironically, the skinny herd prob lem again. What Should We Look At? There is no single solution to every farm’s problem. There is no silver bullet that will slay the dragons that are dragging our businesses down. But there are many tools that we have at our disposal right now which can help us identify and correct problems. We have financial records, our production records, and our special records such as field, herd, DHIA and somatic cell. If we combine the evidence that we can gather from these sources, and look at them with two eyes, we can gain more depth per spective. This will help us iden tify root causes to problems and focus our management atten tion. But we need a systematic approach to guide the process. Analyzing our past perform ance is the first step in a survival strategy. In this process we can identify our business’s strengths, weaknesses, opportunities, and threats (SWOT analysis). To do this, we will need our financial (tax accounting) records, begin ning and ending inventories for the year, and the above mentioned production records. Which Measurements Should Be Examined? Good accounting and busi ness management services offer profit and loss statements which are adjusted for balance sheet changes. These are also called accrual-adjusted income state ments. They enable us to focus on what was produced (rather than only what was sold) and the total impact of that process on the business. In addition, they should present some im portant financial information for the year, such as change in net worth, debt-to-asset ratio, current ratio, return on assets, percent of income to pay opera ting expenses, and term-debt coverage ratio. Ideally financial measures should also be related to the pro duction unit applicable to the major enterprises. These might be expressed as profit margin per acre, per bushel, per cow, per CWT., etc. This requires some careful record-keeping and quite sophisticated analysis processes. Tools Available Finpack from the Center for Farm Financial Management, University of Minnesota, is more user-friendly and affordable to farmers. For $595, it can be in stalled on any Windows 95 or later computer. A free demon stration version is available from your farm management agent. Finpack is the most compre hensive farm financial planning and analysis system available. It enables the farmer to quickly and easily develop balance sheets and year-end analyses. In addition, if we wish to focus both eyes forward, its very pow erful planning modules effi ciently prepare strategic (long range) and cash flow plans. This great cash-flow planner alone is worth the price of the entire package. Report On Pa. Junior Holstein Convention (Continued from Page D2B) Folding Display Contest The Pennsylvania Junior Hol stein held its Folding Display Contest during the Junior Hol stein Convention. There were seven participants. The junior division contest winners were: Hannah Bach man, Potter County, with the display, “Calves are babies too;” David Wilson, Juniata County, with “Not always black and white;” Jordy Mcllwain, Tioga County, with “The milk sample!;” Melissa Harper, Berks County, with “An antibiotic vs. mastitis;” and Corbin/Clayton Wood, Adams County, with Lancaster harming, Saturday, m, 2001-U29 A two-day training session for Farmer Finpack will be offered at Cumberland County Exten sion Office on Tuesday, March 20 and Thursday, March 22. Hands-on computer training will commence each day at 9:30 a.m. and end by 3 p.m. A fee of $4O will be charged for each computer utilized. Basic Win dows and keyboard skills are a prerequisite. Attendance will be limitedJatheiirstlOjregistrants who send in the $4O fee. For more information and to register, contact, Cumberland County Extension Office, 1100 Claremont Road, Carlisle, PA 17013, (717) 240-6500 or e-mail rfreund@psu.edu. “Shoot for the stars.” The senior division winners were: Trisha Mclllwain, Tioga County, with “Holstein Trivia,” and Desirae Hillegass, Somerset County, with “Got Holsteins?” Photo Contest Winners The Pennsylvania Junior Hol stein held its annual Photo Con test during the Junior Holstein Convention. Amanda Gates, Centre County, won the “People” category. Bethany Trotter, Lawrence County, won the “Animal” category, and Matt Shoenfelt, Perry County, won the “Scenery” category. KS iPhmm mmß Training Offered