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Year-End Inventories Critical

December 16, 2011
 
 

Source: University of Wisconsin

 
A critically important business task to place on - and in a timely manner check off - of your To-Do List this month is to take year-end inventory of livestock, supplies, fuel, machinery and other assets according to Ken Bolton, University of Wisconsin-Extension dairy/livestock agent.
 
"Preferably the inventory is taken precisely at 11:59 p.m. on December 31, although, my guess is many people will have already committed that specific time on their social calendar. It really doesn’t matter whether your inventory is taken on December 29, 31 or January 2 or 5 as long as it accurately reflects inventory amounts and dollar values on or about year-end," he notes.
 
Combined with values of Long Term Assets like land and buildings; and Current Assets including grain, feed, cash and accounts receivables, a year-end inventory positions the business manager well for the coming year. Whether for business planning/decisions or meeting with the lender, the information contained in an accurate, complete Balance Sheet represents the financial foundation of your business.
 
The Balance Sheet is a snap shot in time of your business assets and liabilities. The difference between the two is your Solvency (Equity) position or the dollar value of what you own in comparison to the total dollar value of the business. Once you have the inventory completed you can add the updated values of what is owed on loans, including account payables, to complete the Balance Sheet update.
 
According to Diane Shoemaker of the Ohio State University, "There is no substitute for going out during the first week of the year and inventorying animals, feed, seed, fertilizer, fuel, supplies, and any other inputs that are used in production at your farm operation. At the same time you are gathering all sorts of financial information for tax purposes, update checking, saving and hedging account balances."
 
Annual, year-end Balance Sheets constitute both the year-end statement for the current/past year and the beginning statement for the coming year. Comparing year-end equity and solvency positions to the beginning Balance Sheet values documents financial trends. Is your business adding, maintaining or losing equity?
 
For more information about business management including Excel spreadsheets to assist in the update or creation of your Balance Sheet business financial statement, go to the UW-Extension FARM Team website at http://www.uwex.edu/ces/farmteam/. to download the spreadsheet "BSAgFA". The spreadsheet will soon be available on the Center for Dairy Profitability (CDP) website at http://cdp.wisc.edu/Whats%20New.htm . Scroll down the page to "Working Capital Decision Support System" and click on "BSAgFA".
 
While you’re there be sure to take a look at the other tools, articles and decision making aids throughout the CDP website including the "Working Capital Decision Support System" business planning tool !
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