By Stephanie Elsen
Calling all agricultural professionals! The mission of The Farm Financial Standards Council is to create and promote uniformity and integrity in financial reporting and analysis for agricultural producers. To help fulfill their mission, they would like to answer the questions agricultural producers have regarding accounting standards for farm businesses.
Click Here to Email Your Questions or email FFSC@redwingsoftware.com with a subject line of “Questions for the FFSC”. The FFSC will select questions to answer on this blog.
By Stephanie Elsen
The Farm Financial Standards Council (FFSC) has been working on developing recommendations for hedge transactions for agricultural operations. In January 2014, nearly 70 pages of additional content will be added to the Financial Guidelines for Agriculture. The content will provide content and examples of how to account for hedge (futures and options) transactions on financial statements for agricultural producers.
The additional content to be released contains information about two types of hedging: fair value hedges and cash flow hedges. Fair value hedges are when a producer stores grain that is valued on the balance sheet at fair market value and is readily available for sale. In this case the resulting hedging gains and losses are included in the revenue section of the income statement. Cash flow hedges occur when a producer hedges items not available for sale, including planned or growing crops or livestock. These items are valued at cost on the balance sheet, and the resulting hedging gains and losses may be excluded from the income statement and instead shown in other comprehensive income.
To learn more about the FFSC recommendations on accounting for hedging transactions, look for the new content in January of 2014 at www.ffsc.org
The FFSC was created to promote uniformity and integrity in financial reporting and analysis for farmers. Learn more about their mission and the tools they offer by visiting their Web site: www.ffsc.org
By Stephanie Elsen
The Farm Financial Standards Council or “FFSC” is an all-volunteer non-profit group consisting of individuals interested in the improvement of financial and managerial accounting for agricultural producers. The FFSC works to create uniformity in farm financial accounting analysis. Farmers can benefit from paying attention to the FFSC and The Guidelines.
Using The Financial Guidelines for Agriculture provides consistency to third parties such as lenders and consultants. If you understand and follow The Guidelines, your lenders and consultants will have a better understanding of your financial information. With a better understanding of your business, those third parties can help you improve your operation. While you may be using your farm accounting software application to track this information, setting it up correctly is also important, and that’s when you can turn to The FFSC Guidelines.
The FFSC Guidelines are detailed in one document, which is indexed by subject. While The Guidelines are quite lengthy, reading the entire document from cover to cover is not necessary. Rather, The Guidlines should be used as a resource when a specific question arises. For example, there may be a field in your accounting system for you to assign a value to breeding livestock. You may not be aware of how to assign this value, and this situation is a perfect example of when to turn to the FFSC Guidelines and look up the best way do that.
The FFSC was created to promote uniformity and integrity in financial reporting and analysis for farmers. Learn more about their mission and the tools they offer by visiting their Web site: www.ffsc.org.
By Stephanie Elsen
Thousands of Red Wing Software customers understand the benefits of using software specific to agriculture in managing their farm, rather than using a basic program. Because of their wide-appeal, basic, mass-marketed accounting systems get a lot of press and have a massive number of users. These products are top-of-mind for many people in search of accounting software. Many people ask us to compare CenterPoint against those products. Red Wing Software's farm accounting software, CenterPoint Accounting for Agriculture, includes the basics you need such as writing checks, entering payables and receivables, and managing your general ledger. CenterPoint offers specific features for farms to help see their true potential. Here are some of the main differences between CenterPoint Accounting for Agriculture and basic accounting programs. To summarize the reason: many CenterPoint users come from basic programs and are seeking specific features that can help them manage their farm better.
Book, Market, and Tax Asset Value Tracking:
Know the true value of your assets for whatever purpose you choose.
Budget and Forecasting:
Gain the ability to create “what if” scenarios for your farm, and you’ll be able to project future sales, cash flow, income statements, and assets and liabilities. You’ll then be able to more accurately plan for future business strategies!
Owners and managers can get in-depth financial analysis with unlimited ability to structure and segment entire operations, profit centers, accounts, and inventories to track data, combine entities, and receive the most relevant farm reporting available today.
Information Tracking for Farms, Fields, Landlords, etc.:
Always have access to information at your fingertips about your farm, land, etc. for yourself and your managers, landlords, bankers, and more.
Multiple Quantity Inventory Tracking:
While basic programs often don’t allow for any inventory tracking, CenterPoint for Agriculture allows for inventory tracking in multiple quantities, so you can keep better track of your items no matter how you buy or sell them.
Multiple Tax Entities:
Allows you to track multiple tax entities in one database for keeping financial data separate, yet still perform combined business analysis when necessary.
Provides detailed crop and livestock information on a cost per unit basis.
Calculates ratios for your farming operation and shows trends, so you can address issues and become more profitable.
Transaction Distribution to Multiple Accounts:
Easily distribute complex transactions across multiple accounts and production units, for an accurate financial picture.
Expand Limited to Unlimited.
Some programs limit the amount of data you can have in your system. When you reach these limits, which you were likely unaware of at the start, you will need to move on to something new. Here are some of the ways CenterPoint compares to typical basic systems when it comes to limits:
| ||CenterPoint Accounting
|Companies ||Unlimited ||Limited|
|Concurrent Users ||Unlimited ||Limited|
|Customers ||Unlimited ||Limited|
|Inventory Items ||Unlimited ||Limited|
|Support Calls Allowed with Support Plan ||Unlimited ||Limited|
|Transactions ||Unlimited ||Limited|
|Years of History Saved ||Unlimited ||Limited|
Beef Up Security.
One person might start out running the whole accounting system, but eventually tasks will be divided up. At that point, you will likely want to limit what employees can do and see in the accounting system, based on their job. CenterPoint has menu level security, so users can see only the screens they are given access to within the system.
Not all programs are created equal. Any accounting system has its positive and negative points. Just because something is used and known by the masses does not mean it’s the best product available. Basic programs do a great job for many farms, for many years. But when your farm starts to outgrow its accounting software feature set, it might just be time to contact Red Wing Software. 800-732-9464, email@example.com.
By Red Wing Software
Overhead expenses are those production and non-production costs not readily traceable to specific profit centers or production center details. Although overhead expenses are not directly related to any specific area of your business, they do play a part in the profitability of each area. Account distributions can be used to automate the process of expensing overhead to profit centers or production center details.
Expenses can be distributed by percentage, by acre or by head, and can be distributed at the time the expenses are entered or later when you know exactly how they should be distributed. A distribution can be set up that distributes all overhead expenses, or distributions can be set up for various scenarios. For example, you could distribute utility costs to the various entities of the business. Distributions can also be used to distribute unallocated revenue, such as a government ag payment.
Overhead expenses, such as insurance expenses, will be distributed to all profit centers based on each profit center’s percent of total gross revenue. In our example, dairy is 55% of the operation. Crop is 45% with two crops of corn (60%) and soybeans (40%).
If the insurance bill is $1,000:
- $550 insurance expense would be allocated to dairy.
- $270 insurance expense would be allocated to corn.
- $180 insurance expense would be allocated to soybeans.
Allocate your overhead expenses correctly with account distributions, and you’ll have a better idea about your true product costs.