As the weather turns slightly warmer and our eyes zero in on the greening up of the season, it feels like a good time for spring cleaning. Wouldn’t it be wonderful if you could profitably apply that urge to financial record keeping on the dairy farm? You don’t have to answer anyone but yourself but here’s another key question: “Did you file your tax return without the mess, stress or bother?” Or are you still recovering from late night headaches, lost documentation syndrome and the guilt of missed deadlines? If all was not smooth running in the financial records department, now might be the perfect time to tackle desk drawers, plastic bins and maybe even shopping bags that are overflowing with financial statements, receipts and correspondence. These are the signposts of your record-keeping shortfall! Forget about the annual shame and blame over “how did this happen?” and target a complete turnaround starting now!
1. Stop Crying Over Spilled Milk Records
Don’t blush! You are not alone. Despite the so-called digital age, paper records seem to have multiplied. You only have to watch one or two reality shows such as Clean Sweep, Pub Makeover, or Restaurant Disaster – to learn that unsuccessful businesses have one thing in common. They do NOT keep good records. There may be exceptions out there who manage well amid visual chaos, but it is hard to imagine.
It doesn’t surprise me that the owners and managers of struggling businesses are able to recognize, through increasing debt, declining morale and disappearing customers, that they are in trouble. What is surprising is that they keep on doing the same things they’ve always done -namely ignoring the paperwork -while continuing to hope for a different end result.
2. Plug The Hole In Your Milk Income Bucket!
We must get ourselves into the home or dairy office and commit to doing “forensic organizing” among the paper piles. We could be facing a mountain of receipts, stacks of bills-to-be-paid, overlooked notices and, as usual, a huge backlog of filing. Have you ever lost a registration certificate that you know you received, but you just can’t put your hand on? Do you find yourself facing multiple pages of feed bills and yet you’re not sure if this supplier is worth the expense? Have you paid more than you care to admit in late fees and premiums because you couldn’t face the mountain of paperwork? If so, there is a hole in your dairy income bucket.
Yes, too often struggling operations have dairy offices that fall somewhere between an archeological dig and a garbage dump. Nevertheless, that doesn’t mean the correct course of action is to give up and throw it all way. Records are crucial. Indeed, the size of the mountain is not an excuse for mismanagement. The most important feature of well-kept records is that they must be easily retrieved….for reference, legal backup and decision-making and maintenance. You must commit to plugging the leaks caused by mismanaged record keeping.
3. Lost Records Must Be Found
It all comes down to three ways of finding: finding the information, finding a way to store it and finding a way to use it. Ignoring the problem is not an option. So begin by gathering all the paperwork into one place. Having multiple disorganized locations (in the house/in the barn/in the truck) is merely providing an excuse to procrastinate and, even worse, it’s an opportunity for losing things! Once you have gathered all the paper into one location, take that massive pile and — one paper at a time – get it into the proper primary sort: cattle; crops; equipment; bills owing; bills paid. To do these sorts, you could use plastic envelopes or, if the piles are especially huge, plastic bags. Apply a quick label and all like items can be gathered in one location. Your first quick sort will put everything into only three piles: “To Do” To File” and “To Read”. When you start to see order forming out of the chaos, you will have taken the first step in recapturing lost money and missed opportunities. If you want to plug up that bucket hole, start by “restoring order”.
4. Records must be Used to Provide Value
There are many ways to keep records. Some managers use methods that were in effect generations before them —- and are still successful. Others are adapting to modern technology and revise and streamline their information flow to keep up with the digital age. Regardless of the specific method, the real test of your record management system is measured by one thing. How useful is it? The best kept records that sit twelve months of the year in a drawer or file will still be there when the dairy operation fails! Data must be used for spotting trends, used for making decisions, used for revising inventory and used for negotiating terms. Dairy operations are dynamic, and decisions change based on the accuracy and use made of the records that are kept — and used!
5. Paying Bills in the Short Term Doesn’t Guarantee Long Term Stability
You may have decided at this point, that this article has nothing for you. After all, even though your records are not perfect, you are keeping the bills paid. Finances 101 encourages us to believe that if the bills are paid, all will be well! However, in actual fact, there are other variables that must also be in order before we can ensure that all is well on the dairy farm. Short term solutions like using credit to pay bills or selling necessary equipment might allow the bottom line to remain in the black temporarily, but could prove ruinous in the long run. The three main financial statements – balance sheet, income statement, and cash flow plan — give the full picture and must be maintained and used in conjunction with each other to provide a clear picture all three of the farm’s business situation. Proper usage of these three information sources can only be done with consistently up-to-date and accurate record-keeping.
6. Keep Records Beyond the Simple Cash Flow Numbers
The top 1% of dairy managers separate themselves from average or poor managers by being meticulous about records that go beyond the simple bank balance or bottom line. These managers are looking for any information that allows informed decision-making regarding economies of scale, herd size, farm structure, capital investment, feed costs per animal and genetics. They are enthusiastic collectors of any statistic, research or anecdotal advice that could positively affect their particular operation. These are the managers who seek out formulas such as DE (dairy efficiency) and seek out other industry leading benchmarks beyond milk production per cow.
7. What are Good Records Worth to You?
The challenge for all dairy managers is to figure out the best way to manage the massive amounts of incoming paper and information. At best, the financial disorder causes mistakes, late fees, overpaying, raised interest rates, and debt. At worst, chaos in your finances can destroy your credit simply due to inaction on paperwork stagnating on your desk. Not using information that impacts your cropping, breeding, and genetic decisions, can also impact sustainability and economic viability.
8. You Need to Keep Records Before You Can Break Them!
The more information you have at your fingertips, the more opportunity you have to turn a struggling dairy business around. With clear benchmarks, goal setting, priorities, you no longer are managing from crisis to crisis. Each step up in records organization is a step forward for the dairy operation. Not using information that impacts your cropping, breeding, and genetic decisions, can also impact sustainability and economic viability. Whether it is saving on expenses, decreasing vet costs, raising production, reducing overhead or making better use of labor and equipment …. The first step is the same… you must have good records. The three crucial usage steps are: 1. Discover what you need. 2. Prioritize according to your goals. 3. Take Action!
9. Help is Available.
Every manager has strengths and weaknesses. Sometimes it is the perfectionist who falls behind with the false idea that the perfect time will come to do the complete job. It isn’t lack of ability that is causing the problem. It’s inaction. There comes a time when it makes sense for your business to invest in professional bookkeeping, accounting, and back-office support to ensure your records are always kept up-to-date and accurate. Timeliness is the key. Moreover, delegating those tasks that would be better handled by someone else will not only increase your available time, but allow for a more efficient labor structure.
Ask yourself these questions:
- Do you have the time to do the work required? Will catching up on finances cause you to fall behind in another crucial area?
- Do you have much experience, knowledge or skills when it comes to making the financial decisions your operation is facing at this Expansion, selling or taking on partnerships or reducing liability may need legal advice.
- Can you afford to lose any more money by continuing your current mode of record management?
- If things go wrong, are you comfortable taking responsibility for your record keeping decisions?
The Bullvine Bottom Line
Regardless of whether you’re motivated by a new season and the potential for growth and renewal, or whether spring woke you up and you’re now hell-bent on clearing out the cobwebs that are holding your dairy business back, it’s clear that maintaining proper books and records is vital to dairy success! Spring cleaning may seem somewhat ordinary but, when applied to record-keeping, it will take your dairy to extra-ordinary!
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