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