A simple inexpensive computer software program may provide solutions for farmers looking for ways to collect and use information more effectively.
Jason Johnson, Texas Extension economist, San Angelo, says a program as simple as Quicken may solve farmers' information overload. "Quicken is one possibility," Johnson told seminar participants at the recent Beltwide Cotton Conferences in Anaheim, California. "But other software programs may work equally well. Just make certain the program will do what you need it to."
Johnson said Quicken is not designed specifically for agriculture, "but it is adaptable. It allows farmers to select one system from which they can pull out relevant information and use it for management decisions."
He said accurate records are essential for a number of reasons. The most obvious is for tax purposes. "But farmers must realize the difference between tax accounting and managerial accounting," he said. "For management, they need new layers of information."
Managerial accounting includes information that helps farmers make business decisions. "It shows where money comes from and how it is spent," Johnson said. "It helps identify profitable enterprises and farm entities. Growers can look at lease rates, income from specific crops, returns from various segments of a farming operation and make comparisons."
He said computer software allows them to do that.
He likes Quicken because of its simplicity. "It looks like a checkbook," he said. "It's also inexpensive and readily available, from outlets such as Walmart, for instance. And, although it's not designed specifically for agriculture, we can manipulate it."
Johnson says the software offers potential for listing income categories, such as cattle, corn, cotton or grain. It also provides for expense categories, such as fuel, fertilizer, land rent, insurance and pesticides.
"Just like a check, the software provides a memo line," he explained. "Farmers need to use the memo line religiously to record and categorize every transaction."
Setting up categories and classes is essential to success, he said. A category may be a specific farm or a specific crop. And that category may be further broken down. For instance, Farm A may be one category and cotton from farm A may be a separate entry. No-till cotton from the same farm could be another class. Farmers may detail classes as precisely as variety or planting date.
"Precision is necessary," Johnson said, "to make accurate comparisons and determine where money is spent and profit is made. The power of categories allows a farmer to take information and use it for management decisions. But they have to be meticulous about logging in the information."
Johnson says an insurance check, for instance, may cover two crops. "On the memo line, divide the cost into classes," he said. "If the insurance check is for $1,000, subdivide it the way it's spent. Perhaps $400 for corn and $600 for cotton. That way, when they review income, they can allot specific expenses to specific crops."
He recommends an overhead class to cover any cost that can't be charged against any one crop or farm entity. "Utilities, for instance, can't be charged against one enterprise and should be put in an overhead or general farm expense category.
"But don't lump too much. If a farmer can assign a cost to a specific crop, he should assign it. And be consistent with categories. It's the specific information included in the memo lines that allow farmers to make comparisons that help with management decisions."
Johnson said tax reporting is an important aspect of any record-keeping system. "With this program, farmers can flag items that are deductible. The system develops appropriate forms for tax reporting."
Johnson said the system also allows farmers to analyze cash flow by month. "They can identify when money comes in and when they may need to borrow to meet expenses. Past records help project cash flow needs for the coming year. Records also help produce a profit/loss statement and brings the separate pieces of the farm financial situation into one big picture."
He said information gleaned from the software helps farmers decide on purchases and to develop marketing targets for each enterprise.
"We can't change what we can't measure," he said. "This program offers a means of measuring what we're doing."
He said the main weakness of Quicken is for personnel. `If a farmer has multiple employees, he might consider Quick Books instead of Quicken. But Quick Books offers only business programs and will not handle personal expenses."
The program is appropriate he says if:
The farm has minimal employees.
If the farmers wants to use it for personal and business financial management,
If he's willing to enter everything in the register.
Johnson said Quicken and other software programs come in various versions. The more accessories a version has, the more it costs. "Determine what you need and select the program that comes closest to meeting those goals," he said.