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“Growing Advantage” was the theme of the 2011 Almond Conference earlier this week in Modesto, CA. The theme was well deserved by an industry whose production has ramped up from 516 million pounds in the early 1990’s to around 1.9 billion pounds this year. I attended a portion of the conference, and I was particularly impressed with the panel presentation on the Economics of Almond Production.
A common theme from several growers on the panel revolved around subjects that are near and dear to a CPA’s heart: strong accounting systems, active budgets, and measuring results. The presentations by these growers were a great illustration of concepts that we’ve been talking about for a long time, and I’m excited to see them applied in the ag setting.
Accounting Systems – the days of pencil and paper are gone for most businesses, and farming is no exception. The most important thing about an accounting system is that it should be able to supply the information needed for informed decisions on a timely basis. We’re seeing more and more ag businesses invest the resources to upgrade or add systems that are leading to better informed decisions. Most people didn’t choose to farm because of their love for paperwork, but those that pay close attention to the financial matters will have an advantage.
Active Budgeting – one grower talked about their operation’s use of budget to actual reports, including the use of cost centers to separate crop production and overhead costs. These were monthly reports with line by line budgeting. Does it take some time and headache each year to plan this budget? Sure, but the reward is better feedback throughout the year in monitoring their financial performance. A budget can look like an overwhelming process, but we’ve helped clients break it down into manageable pieces that are easier to deal with and achieve results.
Measuring Results – several growers talked about measuring Return on Investment and Return on Acreage, both being key components of the farm business scorecard. How does your net return per acre compare to the value of that acre of land? Karen Klonsky discussed the UC Davis cost study results which calculated that it costs $8,738 per acre to establish an orchard – what kind of price and production results are needed to make that a profitable investment over the next 25 years? [As an aside, the UCD cost study can be found at http://coststudies.ucdavis.edu]
In summary, the conference was well worth attending. The presentations highlighted the fact that the growth of business expertise in the almond industry has kept pace with their expanding crop production. Financial measurement and analysis is just as pertinent for the farm as it for the factory, and we enjoy helping our clients make these concepts a reality in their businesses. Best wishes to the industry for a great 2012!
Once again the ground is shaking, dust is swirling, and lots of slow moving machinery is on the road. You don’t have to go far out of town to see corn being chopped into silage for dairies or almonds being shaken from the trees and swept into rows in the orchard. Harvest is a time of reckoning, when yields are counted and results are tallied.
When you think about it, harvest is a lot like running a business. The whole process is similar to the kind of annual scorekeeping that many businesses do at the end of their financial year. There are a number of object lessons that can be learned from the farm life cycle:
Yield – The yield is similar to the revenue reflected on your business income statement. But what about all of the activities that influence that yield? How does a business owner or farmer for that matter impact the results of his harvest?
Inputs – The successful grower spends time and effort to add soil amendments, fertilizers, and other nutrients that will help maximize the crop. What factors help determine the size and quality of your business “yield”? Depending on your business, it could be investments in better technology, or additional training for your employees. And just like the farmer, you’ll need to weigh the costs vs. the expected benefits.
Dormancy – the almonds being harvested all around us required a certain number of hours of cold weather during their winter dormancy season. Businesses also need downtime to regroup and plan for the year. How much time are you allowing to think and plan for your business? How effective are those planning sessions?
Water – every crop being harvested is the result of a sustaining flow of water during the growing season. Cash is the water of every business – are you managing your cash flow effectively? Are you strategically saving the excess cash in good times as a resource for “drought” in other seasons?
The list could go on, but suffice it to say that whether your business is farming or something else there is a lot that goes into completing a successful year. Thoughtful strategic planning, careful budgeting, and diligent financial oversight can all work together to grow better fiscal yields in any business. So the next time you drive through a cloud of harvest dust, take a moment to appreciate all the planning and processes that result in food on our tables. And to all of our farming clients and their families, best wishes for completing a safe and profitable harvest!
In just two weeks from today, the World Ag Expo in Tulare, CA will be opening for its annual 3 day run from February 8th through the 10th. Touted as the world’s largest annual ag expo, the event covers 2.6 million square feet of show grounds and attracts around 100,000 visitors each day. The 1,600 exhibitors will be bringing lots of new equipment to see, and information to absorb from all sectors of the industry.
I’m excited about all of this because several of us from Grimbleby Coleman will be visiting the Ag Expo on Feb. the 8th. We’re looking forward to learning about new developments in the industry and visiting with our clients. If you plan to be there, let us know by an email or leave a comment below – we would love to stop by and see your exhibit and hear how things are going for you.
More info on the event is available online at www.worldagexpo.com. Hope to see you there!
Success in business lies in understanding the needs of our clients and customers and then providing something of value in response. Sounds simple, right? Our customers will tell us what they want, we take care of it and everyone is happy. Let me use my recent trip to Lowe’s as a quick case study of how this just might not be so simple in real life.
I stopped by Lowe’s one evening after work with a fairly simple mission: get the part I need to fix a broken plug on our vacuum cleaner’s electrical cord. Being the power-tool-inhibited accountant that I am, I knew there was a chance that things could get a little dicey once inside the store… but I was able to find the electrical aisle successfully on my own. I noticed a Lowe’s employee in the aisle and headed over to him with my simple request.
Me: “I’m looking for something to fix the end of a power cord.”
Employee: Blank look.
Me [realizing that this isn’t coming out quite as smoothly as I intended]: “Uh, you know, like where you plug a cord into a wall. I need something to fix that.”
Employee: Blank look, with hint of nervousness.
Me [wondering if I should talk louder, slower, or both]: “You know where the prongs are that go into a wall, and one of the prongs came out so I need to fix it…”
Employee: “Uh, this really isn’t my main area. I’ll get someone else to come over here.” [Exits rather quickly]
Ok, I’ll admit that while I could picture what I needed, I didn’t have a clue how to describe it. Actually, I should have been using the phrase “replacement plug” (which, for the record, I discovered on my own in the next aisle).
So maybe that communication thing isn’t always as easy as it sounds. Think about your customers. How can you help them communicate their needs and questions? Is industry jargon too often a barrier to your customer’s understanding? Sometimes it helps to look past the question to the motivation behind it. What are the unasked questions under the surface? While you may not have all the answers, your customers will appreciate your attempt to speak and understand their language.
I grew up in the country, where roads are “maintained” rather than “improved”, and where storm drainage can often be a challenge. So we were used to big rain storms (like last week) resulting in large puddles of water on either side of the road. We knew it was a big storm when the puddles met in the middle and stretched across the entire road (and as kids, it meant that some excellent “mud biking” was in store). A day or two after the rain had stopped, someone would notice the puddles and put up a warning sign like the picture above.
This always struck me as humorous. Everyone who lived on our road, or used it on a daily basis, had already been navigating the puddles for several days by the time these signs started showing up. We already knew, or had learned the hard way, that caution was needed. So what was the point of the sign?
When is a warning sign most effective – before something dangerous or unwanted happens, or after it occurs?
What about your business – are you getting timely warnings before adjustments are needed, or just historical indicators telling you that something has occurred? What are the key performance indicators that drive your business? How do you get accurate and timely feedback about these key measurements, so that you can react when adjustments are necessary?
Think about your potential warning signs and put them up early. Let people know what they mean and how to avoid the problems that could arise. Prepare a plan to follow to get you around the potential pitfalls.
And please, drive safely this week!
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