Five Ways to Become a Better Farm Manager
These tips can help your business run more smoothly.
Bryce Knorr
Published: Nov 13, 2010
Most farmers score well as producers, but they're not as confident in their management skills. That's why we asked readers to share their best management tips – the things they do that really make a difference in their bottom line. Here's what they said:
Switch to managerial accounting
Managerial accounting integrates financial and production information in order to evaluate costs, expenses and revenues based on appropriate units of production. This is the best way to truly know your costs and where you should focus more time in your business says Ron Swanson, Iowa farmer and recent president of the Farm Financial Standards Council.
“Most of the benefits of managerial accounting will accrue to the larger, more complex, multi-faceted operations,” he says. “It is an internal reporting concept where the management team uses the information to make operational and strategic decisions for the farm as well as evaluating performance of the employees and the segments of the business they are responsible for.”
Accounting is based on cost and profit centers, rather than the traditional cash- based enterprise approach that agriculture has historically used. This allows a better understanding of what drives cost of production and being able to link financial analysis to strategies to improve financial performance.
“Even though market prices are currently at historic levels, expenses are rapidly escalating as well,” says Swanson. “This gives you the ability to determine the levels of profit after all costs are allocated and evaluate the different options quickly in this uncertain environment.”
Make employee meetings pay off
Meetings among employees in many businesses can be time-wasters. The same can be true on the farm as larger operations hire more workers and managers. At the same time, having meetings is an essential tool.
Jorgensen Land & Cattle, of Ideal, S.D., keeps meetings on track by using written agendas to guide discussion. Greg, Cody and Bryan Jorgensen, start their week with a 6:30 a.m. meeting on Monday morning, following an agenda that’s kept on a spreadsheet. Around 7 their chief financial officer goes over accounts payable and receivable and other numbers. Then at 8, the rest of the farm’s employees join the session.
The agenda always includes going over minutes of the previous week’s meeting, says Bryan, to check the status of the “to do” list, which is then updated. A safety item is usually discussed, along with chore schedules for the weekend.
The weekly meetings are augmented by lunch served daily to all employees and visitors, such as buyers for the farm’s bulls. “The Monday morning meeting puts in motion the entire set of activities for the week, and gives the employees a chance to set priorities,” says Bryan. “Lunch gives us all another opportunity to network on a daily basis.”
Think like a CEO
Production agriculture is a business. Period. And all businesses need a CEO to think about and get the major decisions right. More than likely, that CEO is you. So start thinking like one.
“I have always felt it is important to steer your business in the right direction to stay competitive,” says Kevin Green, DeWitt, Iowa. “Through good financial management and above average marketing, growth is attainable.”
Kip Tom, Leesburg, Ind., started thinking strategically back in 1985 when he was growing 1,500 acres of corn and soybeans. Profits were disappointing. He even considered getting out of farming altogether. Instead, the Toms decided to treat their farm like any other manufacturer to extract more dollars for their management time. Using specialty crops as his new 'product line,' Tom began to "seek out the best of the best procedures that we feel we can adjust to our business, from companies inside production agriculture and outside the industry," he says. Today Tom is Pioneer's largest seed grower with operations in Indiana and Argentina. His family business includes a trucking operation, identity preserved crops and other fresh vegetables like cucumbers and tomatoes.
Rather than getting stuck on the treadmill of day-to-day operations, farmers like Tom and Green try to be CEOs, thinking strategically about the future to make sure they’re positioned for profit.
Hire the right people
Good people make the difference between good and great in any business. Farming is no different.
“I have always followed the principal of hiring a “good” person for jobs - honest, reliable, committed, and willing to work,” says Harley Sietsema, who raises turkeys and grain in Allendale, MI. “That also means someone who has exceptionally strong references or has a family background that I am personally familiar with. If I can find such candidates, I will find the work for them.”
Outsource key roles to specialists
As businesses keep growing operators must identify the need for specialized skills, information and analysis. You need to realize when you’re not the right person for the job and outsource that job to a specialist.
"We've always relied on people with specialized skills like accountants for taxes or veterinarians for livestock, but as our operations get larger and larger, we will need to do that more and more," says Kansas State extension farm management economist Kevin Dhuyvetter.
However, at some point when these operations get to a certain size, some of these outsourced functions are brought back 'in house.' "So, rather than hiring an accountant to do taxes, some of these large operations will just hire the accountant as an employee, and maybe part of the year they'll actually be doing some fieldwork, who knows," Dhuyvetter says. "Successful farmers will recognize when to micromanage and when not to."
Mike Wilson contributed to this report.
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Tagged: farm, accounting, farming, soybeans, Extension
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