NEXT
MONTH
How enterprise accounting can integrate with day to day management to
rev up the performance of your family farm corporation
Over the last five years, Rick Clouston has become an expert juggler. He s had to.
Based near Selkirk, Man., S & D Clouston Farms grows 1,800 acres of grain and 500 acres of hay and pasture. It also direct markets its own chickens and eggs, and it operates an egg-grading station too. Plus, Rick and his wife Janice are also in the beef business with a partner, and along with his mother, Donna, they re in the process of opening an on-farm store.
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Clouston manages all these areas by financially dividing them with AgExpert software. Plus, he has also taken the next step, using the results to create ratios that guide his decisions.
With the right information base, Clouston says, it s much easier to benchmark and to make strategic business decisions, providing the information is organized into production divisions.
At 29 years old, Clouston started farming full-time when his father died unexpectedly. After a couple of rained-out grain years, he decided to expand into direct marketing meat and eggs. From the start, though, he recognized that he needed a way to track the profit and loss of each part of the operation and to manage his debt payments.
But it takes time. Rick spends a couple of hours a day in the office, marketing, doing paperwork, planning and crunching numbers. In the winter, that s more like five hours a day.
He also takes time to write down and
allocate expenditures for shared assets.
For example, Clouston keeps a log book
in the tractor to track hours and the
amount of fuel used in each operation.
Similarly, he estimates his time and general
labour for each division.
Most farmers associate direct costs
like seed and fertilizer with their cost of
production. However, to get a complete
picture, indirect costs such as fuel, repairs,
equipment depreciation, labour, utilities
and rent also need to be stirred in.
Don t forget a share of the sales and
general administration costs too, such
as storage, freight, management fees and
liability insurance.
Then of course there are debt management
Only when all these costs are assigned
to each income centre can a producer get
a true picture of the operating margins
for that specific product.
Clouston outputs monthly budgets on
a spreadsheet to track the expenses for
each part of his business, showing his
overall cash position. That s a lifesaver,
that spreadsheet, Clouston says. That
way, nothing can get away on me. For
example, if a big mortgage payment is
coming up, he knows what he has to do
to make that happen.
Allocating both direct and indirect
expenses to each of the enterprises helps
Clouston get a clear picture of his cost
of production per unit. Since he s selling
off-farm, setting price is a significant part
of his marketing strategy. He can set his
