Farm Financial Management Demystified
Published by Midwest Organic and Sustainable Education Services (MOSES)
Reviewed By Liz Bawden, NODPA President, NY organic dairy producer
Added October 10, 2012.
BOOK REVIEW
Let’s face it - there are really two kinds of people in the world. There are the “splitters” and the “lumpers”. Splitters are the people who love the hair-splitting details involved in anything. They enjoy pouring over spreadsheets, DHI data, bull proofs, soil and feed analysis, they have written procedures hanging up in the milk house, they have farm shops where all the tools have a place on the pegboard or in a drawer. They will read this book just for fun.
Lumpers enjoy a slightly more carefree attitude toward the details, preferring to concentrate on the bigger picture. This book is for them (or should I say “us”). If tax time makes your palms sweat, and your idea of record keeping is a Red Wing boot box, you really need to read this book.
Written in an easy-to-read style, the book incorporates stories from real farmers about the topic being discussed. It is aimed at a wide variety of farming operations, from vegetables and fruits to livestock, dairy, and egg production. It guides you through the process of setting up computerized bookkeeping systems (it has a strong focus on Quickbooks, but discusses other programs as well). It de-mystifies the financial statements that your bankers want to see, and tells you how to use the data to analyze how you are doing. And it introduces you to use the data in analysis and decision-making. It offers methods to determine which market system to use, how to set prices for your products, and how to set a budget and monitoring process (guided by the principles of Holistic Management).
This is definitely a must-have book for new farmers. For those of us who have been around the barnyard a time or two, it still has a great deal to offer. I have been using Quickbooks on our farm for about 7 years, and I learned several new ways to do things. And although I still found my eyes glazing over a bit when they were talking about accrual adjustments, their explanation of depreciation types helped me to understand what the accountant has been doing with that all these years.
If your operation is diversified, you will appreciate the section on enterprise analysis. Using the information gained there, you can determine which enterprises are more profitable, and at what scale.
The book contains some plain old common-sense too. One farmer commented that the financial analysis doesn’t always tell the whole story, and cautioned producers not to make decisions on the bottom line alone.
I highly recommend this book, and at $24.95, it won’t blow a big hole in your budget!
