Successful farmers need to understand cost structures and the strategic decisions that can be made to help differentiate them from those who struggle financially, says R.L. “Dick” Wittman, Wittman Consulting Services, Culdesac, ID. “Traditional enterprise analysis hasn’t provided answers growers need to determine what decisions are contributing to success or failure,” he states. Wittman will provide profitability tips at the upcoming Midwest Hay Business Conference & Expo, March 13-14 at the KCI Expo Center in Kansas City.
“This is a primer course that showcases new initiatives in the farm management arena to implement professional managerial accounting systems. It also illustrates the often-overlooked linkage between financial analysis and strategic decision making, and how it positions the farm to improve profitability,” he explains.
Participants at Wittman’s seminar can:
• Learn about new initiatives and guidelines to implement professional managerial accounting systems in farm business operations.
• Gain improved understanding of the connection between financial analysis and strategic decision making.
• Develop strategies to evaluate whole-farm business performance and to assess the impact of alternative strategic shifts that may improve operational efficiency, capital asset management, and use of debt leverage.
• Learn about technical issues and concepts that must be understood before managerial accounting can be successfully implemented.
• Gain hands-on access to training and implementation strategies necessary to adopt managerial accounting practices.
Wittman believes professional financial analysis, through managerial accounting, will help hay producers:
• Identify the true cost of compensation. Employers can do a better job of structuring competitive compensation when they better understand what it costs to compensate employees with both salary and non-taxable benefits. Employees are more satisfied and make fewer demands for raises. “I’ve seen operations that save $2,000/year/full-time employee by getting a better handle on this,” Wittman says.
• Know how to determine the breakeven point for buying, leasing or custom-hiring selected equipment operations. This can result in a $10,000-25,000 savings/year on major equipment items. “You can’t do these analyses until you have a solid foundation of actual cost data,” he adds.
• Be able to quantify the economic advantages of intensive vs. no-till/direct seed cropping systems. Management accounting tools allow growers to look at changes in cost structure between alternative systems and give an incentive to make such transitions when they pay. Many producers could document 20-40% reductions in equipment support costs after making these transitions, he says.
• Understand Activity-Based Costing (ABC). This provides a sound basis to make optimal (least-cost) decisions concerning in-sourcing vs. custom hiring operations such as haying, spraying, tillage, harvest, hauling, etc.
Other speakers at the conference will cover biotech alfalfa, organic hay, selling to the horse market and other pertinent topics. The always-popular grower panel will consist of Dutch Rodgers, Decatur, AR; Roger Hatcher, Cumberland,VA; and J.J. Granstrom, Holstein, NE.