Transcript Slide 1
Farm Business Planning
and Management
Our goal?
To help you improve the management of your
business through business planning.
Introduce some management tools
Record-keeping alternatives
Trend analysis
Three year income and expense summary
Calculating cost of production for enterprises
Damona’s 30 + 1 plan
Can You Answer These Questions?
Is the business headed in the right direction?
Does it provide enough income to:
Show a profit?
Cover your loan payments?
Pay family living expenses?
What are your production costs?
What price do you need to receive for your
product to break even?
Strategic Plan Component
Personal Vision,
Mission, Goals
Internal Scanning
Family Vision,
Mission, Goals
Business Vision,
Mission, Goals
Strategic Plan
External Scanning
Strategy
Finance
Personnel
Business
Plan
Operations
Marketing
Percent of group total
Producers having a long-term
business plan***
100
90
80
70
60
50
40
30
20
10
0
61.3
42.9
38.7
Yes
No
Smaller producers
OSU
57.1
Yes
Larger producers
No
Components of a business plan
History and general description
Mission or vision statement
Goals and objectives
Key planning assumptions
Market analysis
Marketing plan
Operations
Organization and management
Financial plan
Key Planning Assumptions
List the family and ranch resources – land, labor,
financial capital, other capital assets, management
Identify planning restrictions and constraints
Name expected products or services
Identify market outlets
Operations, Organization,
and Management
Define each individual’s role in the
business
Develop an organizational chart for large
operations
Small may not be simple!
Dan
or
Nancy
or
Dan
Nancy
Dan
Nancy
Operations, Organization,
and Management
Identify most appropriate legal
arrangement: sole proprietorship,
partnership, corporation, etc.
Develop plans for allocation of profits
The Financial Plan
Initial financial requirements
Historical and projected financial
statements
Enterprise analysis
Risk assessment
Break-even analysis
How would you rate your current
record-keeping system?
Good?
Bad?
Ugly?
Percent of group total
Producers’ financial recordkeeping systems**
100
90
80
70
60
50
40
30
20
10
0
49.4
41.9
26.6
31.5
18.5
Minimal
Ledger
Computer
Smaller producers
OSU
32.1
Minimal
Ledger
Larger producers
Computer
Why keep records?
Provide facts about the business
Include both financial and production
records
Measure business performance
Allow producers to meet legal
obligations, support loan applications,
and arrange for insurance coverage
Historical assessment
Three year trend worksheet
Record-Keeping Alternatives
Computerized Records
Software is not expensive
Easy to keep
Easy to generate reports
Hand Records
Don’t have to learn to use software
Very low cost
Difficult to sort and summarize
Why Quicken?
A popular personal financial records software
package
Inexpensive
User-friendly
Flexible
Quicken’s shortcomings for
agricultural producers
Not built to keep production records
No separate physical data field (can use memo)
Cash accounting (not double entry, no
depreciation records)
No payroll or invoicing features in basic version
Quicken features
Accounts
Budgeting
Loan tracking
Tax planning
Reports and graphs
Online banking, bill payment, investment features
Quicken
Reports
Financial Planning
Features
Cash flow
Tax schedule
Transactions
Account balances
Comparison
Balance sheet
Budgets
Reconciliation
Loans
Savings
College
Retirement
Refinance
Financial Records Needed
Inventory of assets and liabilities
Transaction journal of income and expenses
Copies of tax returns filed
Employment records
How Long to Keep Records
Cancelled checks:
At least 6 years (consider keeping longer)
Investment records:
6 years after tax deadline for the year of sale
Loan agreements:
Until updated
Receipt for large purchases:
Until item is sold or discarded
Tax returns:
6 years from the filing date
Enterprise Analysis
With income and expenses sorted into
enterprises, analysis is easy.
Profit and loss centers are now visible.
Might find out that it is cheaper to buy hay
than it is to bale your own.
Calculating Cost of Production
Identify enterprises
Cow-calf
Stocker
Breeding bulls
Native pasture
Improved pasture
Custom work
Horses
Calculating Cost of Production
Identify enterprises
Allocate cash expenses
Identify non-cash expenses
Allocate non-cash expenses
Add them up!
Calculating Cost of Production
Allocate cash expenses
Identify most appropriate method to match
expenses with an enterprise.
Number of bales of each type of hay to divide out baling
expenses.
Number of acres of each crop with the application rate to
allocate fertilizer costs.
Number of times over field by crop to allocate tractor
expenses
Calculating Cost of Production
Identify non-cash expenses
Accrual adjustments
Account for changes in beginning and ending
inventories.
Pre-paid expenses, supplies, accounts payable, ad
valorem taxes, employee payroll withholding taxes,
accrued interest, loan balances
Need to have a balance sheet
List of items that are owned and owed.
IFMAPS
A free, confidential service assisting
Oklahoma farmers and ranchers with financial
planning since 1985
Trained financial specialists work with families
one-on-one to develop financial statements
and evaluate alternative plans
Contact the local Extension office, an area
Agricultural Economics specialist, or call the
IFMAPS office in Stillwater at 1-800-522-3755
Damona’s 30+1 plan
Spend 30 minutes each week maintaining
records
Take one step each month to improve your
record-keeping system
Monthly items
Update your will
Specify medical directives
Update life insurance beneficiaries
Update beneficiaries on retirement accounts
Have a durable power of attorney in place
Check depreciation schedule for accuracy
Develop and/or update farm asset list
Develop and/or update household asset list
Develop a list of account numbers and contacts
Monthly items
Take photographs or video of assets and
place in safe deposit box
Notify family members of location of
important papers
Relax and enjoy peace of mind knowing that
your family is prepared for emergencies!
Using the Business Plan
Distribute copies to those involved in business
Review plan periodically
Monitor progress, meet with planning team
Keep records
Compare actual outcomes to projected outcomes
Make changes to plan as needed
Just do it!
References:
OSU Ag Econ Department,
http://agecon.okstate.edu/websites.asp
OSU Extension publications, www.osuextra.com
National Ag Risk Management Library,
http://www.agrisk.umn.edu/
Annie’s Project,
http://www.extension.iastate.edu/feci/annie/
Business Planning Guidebook, Minnesota Institute
for Sustainable Agriculture,
http://www.misa.umn.edu/vd/bizplan.html
FINPACK Business Planning Software,
http://www.cffm.umn.edu/Software/BusinessPlan/