(Part two in a series)
Tom and Karla Waters, Orrick, Mo., determined they needed good spreadsheets to help them stay focused on marketing and production goals. Today the farm couple use 35 integrated spreadsheets to keep their business sharply focused - not easy when you consider they farm 3,500 crop acres with just themselves and a full-time employee.
Karla, who serves as office manager, picked up important skills in computer forecasting when she worked in international marketing for a Kansas City firm before coming back to the farm. But the system they use today took years to build. The Waters developed their recordkeeping system through trial and error in the farm's nerve center, a spacious, networked office with conference room for quarterly corporate meetings. The office hardware includes two Macintosh computers and a PC laptop.
"Our formulas are accurate now because we've been doing it long enough, but there were times when they weren't working,bCrLf says Karla (below). "We had a problem tying together return on equity for all the corporations. We had a situation where we punched in a number on this page and then realized it didn't make sense, so we had to go back and look at our formulas.bCrLf
A system of checks and balances give the Waters confidence in their projections. Other shareholders in the corporations look at their figures, and one relative with a financial background is particularly helpful. All financial records are also kept in Quicken, for banking and investments. "The Quicken records are not broken out in fields, but we can use them to cross reference against our spreadsheets as a check to see if we're in the same ballpark,bCrLf says Karla.
It takes discipline and daily work with the spreadsheet before the Waters can manipulate data to their benefit. "There's a little bit of time expense just getting the computer programs right, making sure you're collecting the right data at the right spot,bCrLf says Karla. "The computer is only as good as the person running it."
Even so, most of today's farm operations require this level of sophisticated recordkeeping. And if spreadsheets aren't your thing, it might be wise to have it hired out.
"If you can learn how two spreadsheets interact with each other, you can do three and if you can do three, you can do thirty five,bCrLf says Tom. "The main thing is to have a plan, and have the numbers in the plan,bCrLf he says. "Your accountant can show you what you should be looking at.bCrLf
Simplified decisions Spreadsheet analysis helps keep labor costs low, a key factor in farms this size. But perhaps the greatest benefit is how management decisions are made during planting or harvesting. Tom and Karla analyze costs and project profits well in advance, giving them a roadmap for the growing season. By projecting future profits the Waters can determine how hard they need to negotiate on seed and fertilizer prices throughout the winter.
"When I get off the combine in the fall I start working on what we're going to plant next year,bCrLf says Tom. "We may look at a field history and say, That field is not going to make anything if we plant corn there, so let's take a look at beans, or maybe we need to back fertilizer off, or use a cheaper variety of seed. It's a lot better to look at those projections in the winter than when you're filling the planter.bCrLf
By working the decision-making and what-if scenarios in advance, the Waters are able to generate simple planning checklists for everyone who comes in contact with the farm. That takes stress out of a busy planting season.
"Each day I have a sheet I take with me that shows this variety will be planted on this field,bCrLf Tom says. "I've got the sheet pinned up at the shop so the guy who works for us knows what we're going to plant and where. I'll take a copy to the elevator so they know what I want sprayed and where.bCrLf
Not everyone may need a recordkeeping system like this. But it's sure handy for those who farm on behalf of themselves and off-farm family members who own land and other farm-related investments.
"Grandpa would always say, one of these days, when you're the one farming, you're going to have to be a manager,bCrLf concludes Tom. "He was talking about knowing your costs and keeping good records."
Tom Waters was one of over 170 farmers who attended last week's Farm Futures Management Summit in St. Louis, Mo. Next week we'll bring you some of the highlights from this event.