Many Farmers Underestimate the Value of their Operation

Tax season is in full swing. And farmers who have updated the way they manage their farming operation’s accounting systems may be in for a wake-up call.

In her article, Management Accounting Helps Farmers Make Informed Decisions, Andrea Johnson writes about the shock many farmers experience when they realize their modest farm has blossomed into a multi-million dollar operation. Often without them even realizing it.

Quoted in the article is Norman Brown. For 32 years, Brown has provided farmers with computer financial systems. Brown says there are many farmers out there who need to make the switch to management accounting so that they can make their farming operations as efficient as possible.

Management accounting may look at the cost of feeding and raising livestock vs. selling crops. It can evaluate the cost of running a combine compared with hiring a custom harvester. Informed decisions can be made regarding hiring employees vs. the owner completing all tasks independently on the farm.

Management accounting allows farmers to make decisions using financial measurements that will optimize production and performance. This will help farmers to know if they are, in the long run, going to be able to be competitive and sustainable.

Most anyone who is farming today is a good producer, but we are looking at people that are starting to take a risk management viewpoint for marketing, for expansion, and for financing.

Farmers who are interested in converting to management accounting should work with a specialized accounting firm. They also can contact the Farm Financial Standards Council and the American Society of Agricultural Consultants for guidance.