Take the steps that will enable your dairy operation to strengthen and evolve into a stronger financial position.
By Mark A. Brady, CPA, CVA, Partner
Cooper Norman Certified Public Accountants
The past few years have dramatically changed how numerous industries operate, especially the dairy industry. In the dairy industry, we have seen many articles and posts about the need to be "Fiscally Fit" in various publications and media settings. Much of the discussion was in regard to the need to change with the changing times. For most dairy operations, it became a necessity for survival.
We are now beginning to see numerous posts and articles that discuss items of generally more positive tones. We need to remember that no one can see the future. As our dairy operations and the economy change, we will need to look for and take steps that enable our business operations to strengthen and evolve into stronger financial positions. That will allow them to withstand future downturns that we know are inevitable and extremely unpredictable.
If we were able to put together the management team spoken about in the previous posts and have survived to now, there is a good chance we are headed in the right management direction. We must keep in mind that whether the economy has begun to change for the positive or not, the things discussed earlier while in the down market are still extremely vital. The continuation of those management-type decisions while in upward swinging markets can allow a business to get out in front of the curve and move to the forefront of the industry.
Remember, the real key is to have a management team that has the future success and continuity of the business at heart. They should be looking ahead to identify ways to accomplish things like:
1. Which creditors should be caught up first?
2. How can we improve our lending relationship?
3. How we can rebuild the equity lost by the current owners?
4. How can we put funds away for older, less active owners?
5. Is it time to begin ownership transition to the next generation since values are depressed from the down economy?
Every business operation must review his or her current position (financial and market) and begin asking, answering and preparing to implement plans to successfully complete the items needed to improve, propel and enable their success into the future. The business might even need to reshape the structure of the company, its management and/or its employee workforce.
The list above is in no way all-inclusive and is not what every business needs to accomplish. As indicated, the responsibility of the management team is to identify the needs of your business operations and put into motion the plans to accomplish the desired results.
As accountants, we cannot agree more with some of the most recent posts discussing the importance of having up-to-date bookkeeping and record-keeping systems and a set of personal benchmarking criteria. It is basically impossible for a management team to implement management strategies, let alone set goals, when it cannot identify the position the operations are currently in. Appropriate accounting records, ratios, budgets and projections all assist management in making timely, realistic, achievable plans.
Since, the last few years have been so tight dairy operations have generally operating on an extremely tight, crisis mode. It becomes vital to each operation and owner to be sure that they are planning for the future of longer than just one day. The last few years have been extremely brutal on the dairy industry and not many members of other industries would be able to survive the way many of you in the dairy industry have been able too. If the current economy is truly improved for the dairy industry at all, and we have positioned our operations appropriately, the potential successes are sure to come.
Based in Idaho, Mark A. Brady is a partner with the firm of Cooper Norman Certified Public Accountants. Brady is a Certified Public Accountant (CPA) and a Certified Valuation Analyst (CVA). He grew up on a Montana dairy. Contact him at 208-733-6581 or [email protected].