Chute N the Bull

Chute N The Bull 3/19/09
What does it take to determine if a ranch or farm is making money? Each
farm or ranch has its own set of specific circumstances and reasons for
being in the business. It could be for quality of life, for investment
purposes or for making a profit.
Whatever the purpose for being in the business, each operation should
have monetary goals for the business. Quality of life goals may include
minimizing dollars spent on the operation. Investment goals could state
a desired return on investment or, in today's economic conditions,
minimizing the declining value of assets.
To determine if these goals are being accomplished, each farm or ranch
must have some type of financial and production information system. This
information will help measure the success of the operation. Please
remember, the information gathered by any system only has value if it is
used to make management decisions.
The basic components of any financial and production information system
should include a cash accounting system with depreciation schedule,
financial statements, cattle and feed inventories, and production
records to measure production performance.
In most operations, a cash accounting system can be handled adequately
by computer programs such as Quicken®. This program and others can
provide the information to meet tax needs and the basic data for
preparing financial statements. However, information prepared for tax
purposes does not measure the profitability of a business or its
financial position. According to the Farm Financial Standards
Guidelines, the minimum statements needed to document financial position
and performance are:
• a balance sheet, with both cost and market valuation;
• an accrual adjusted income statement;
• a statement of cash flow; and
• statements of owner equity.
Another segment of the information system should be an inventory system.
An accurate cattle and feed inventory is essential in measuring
production performance and completing financial statements. A complete
inventory by category of cattle (cows, bulls, heifers, stockers, etc.)
should be done at least twice a year. If only done twice, the inventory
should be taken at the beginning of the fiscal year and at the beginning
of the breeding season. This inventory should include a record of all
deaths, purchases, sales and movements among pastures.
These basic areas of information should be addressed in each operation.
Too many operations only use tax-based information from which to make
decisions or, worse, no information at all. Remember - management
decisions cannot be made from tax information. If help is needed in the
preparation of this information, give us a call. You can find this and
past articles on the web at www.mycountrytractor.com for your reference.
Extension programs serve of all ages regardless of socioeconomic level,
race, color, sex, religion, disability, or national origin. The Texas
A&M University System, U.S. Department of Agriculture, and the County
Commissioners Courts of Texas Cooperating


Tommy Neyland, CEA-Ag
Texas Agrilife Extension Service