Take Time to Improve Your Back Office
With spring planting just weeks away, you’re winding down your off-season prep work, but there’s still time to tackle the quality of your back-office information for the coming year.
A 2017 K•Coe Isom study showed people who spend time collecting and interpreting financial and operational in-formation will average higher profits and better solvency than their peers. The research also found “power users” of information had greater labor efficiency, generating more revenue with the same number of employees.
Practices that Pay
Collecting across-the-board data is increasingly important for the sustainability and success of your business, but it doesn’t have to be a monumental task. Even a few simple efforts can help set you up to track essential numbers. Over the next month, consider adopting some of these simple best practices:
Focus on your accounting system. This is the core of your back office, through which all your financials — and even field data — will connect. Set up a system that’s scalable to your farming operation, is cloud-based and can in-tegrate with other software programs.
Spend time mapping out your chart of accounts. Now is a good time to code, repair or update your chart of ac-counts. Organize your revenue sources, whether they’re corn sales, government payments or rents. Decide how de-tailed you want line items to be.
For example, some people lump dues and subscriptions together. Others separate them. Some break out fuel for on-road vehicles from diesel for equipment, while others split them up.
Ask yourself how you will use all of this information.
Move to per-crop reporting. Train yourself to separate inputs. That discipline will help you understand your costs for each crop. Some expenses are direct, such as seed and fertilizer. Others, such as labor, equipment, repairs and supplies, require more “art” in determining how to factor them into your system.
There are two ways to allocate operating expenses among crops:
- You can focus on the intensity that goes into growing each crop.
- You can allot expenses on a proportional share per crop, such as the acres it spans or revenue it creates.
Upgrading your record keeping doesn’t have to be complicated or expensive. Adopting these basic principles will give you a simple but scalable start to optimizing your back office and positioning yourself for greater success.
Learn how to convert fixed costs to variable costs from Peter Martin at the 2021 Top Producer Summit. Register now!
