Farm inventory app by Farmsoft delivers precise farm inventory control, reduce farm inventory waste and shrinkage, track farm inventory to individual employees, farm inventory stock-take, farm inventory traceability.

Farm inventory app by Farmsoft delivers precise farm inventory control, reduce farm inventory waste and shrinkage, track farm inventory to individual employees, farm inventory stock-take, farm inventory traceability.

Farm App Software Brochures: 
[Farm management]  

[Fresh produce packing] 

[Flower packing] 

[Food manufacturing]  

[Meat packing]  

[Fresh produce RFID]

100% accurate farm traceabiltiy

The farmsoft app delivers instant farm traceability recalls, both up and down the supply chain.  Perform recalls in seconds, with full confidence of accuracy and reliability. Minimize risk by ensuring accurate traceability is automatically captured thru natural business processes, easily and quickly. Pass audits with ease and reduce compliance costs using farmsoft's automatic paperwork tools and features. 

Easy, instant farm planning

With the farmsoft app, farm planning is easy with automatic farm task creation to guide teams through the farming process. Plan entire crops for the season or even year with just a few clicks making farmsoft one of the best farm software solutions for easy planning.  

Best practices enforced

The farmsoft farming app creates tasks automatically based on the best practices for your farm, you check their accuracy and adjust them if the weather or other conditions change. The farming team is guided through farm tasks ensuring work is done at the right time using correct materials, and compliance data is captured at every critical point.

Farm audits passed with ease

The farmsoft app has got your farm covered!   You know that feeling you get in the pit of your stomach when you know the auditors are coming the next day? Forget about about it. Using farmsoft, you have the confidence that you can do instant recalls, and generate any traceability, farm summaries, and farm records in a matter of seconds.

100% accurate farm budgets

View estimated Vs actual costs in real time, down to a specific patch/block, or by farm site, crop, and variety. Never have production cost shocks again. Budgets are automatically created by the best practice system and allow projections for any period of time into the future, down to the application of a specific spray chemical or fertilizer.

Instant access to live farming costs for each block, plot, planting, and variety

View costs in real time, down to a specific patch/block, or by farm site, crop, and variety. Compare costs per hectare/acre/M2 between varieties, different farms; and even compare cost per area for each task type like fertilizing, water, harvesting, spraying and more...

Farm yield monitoring & analysis

Use the farmsoft farming app software to analyze previous years of yield with current yield to detect trends, problems or opportunities in the farming process.  Charts allow easy visual comparison of farm yield performance.

Easy farm PHI (Preharvest interval)

The farmsoft farming app stops users from scheduling a harvest if there has been some spray (or other) activity that caused a PHI (Preharvest interval).  This also woks in revers - farmsoft farm software will stop users from scheduling a spray task if that task has PHI chemicals and there is a PHI conflicting harvest already scheduled. 

Automatically managed re-entry period

The farmsoft farming app automatically manages and enforces re-entry periods after the application of farming chemicals that are hazardous.  The farmsoft farm software 

Reduce farm administration cost and time by 60%

Automatic paperwork, labels, and reporting reduces the burden on administration teams and saves everyone's time.

Better fresh produce quality now

Quality control and food safety has never been easier with industry standard quality tests, food safety checklists; or configure your own tests.   Perform quality inspections in field.  Farm managers receive alerts if there are any quality problems discovered or developing in field.

100% accurate farm inventory, no shrinkage!

Know exactly where all your farming materials are at all times, live - in real time!  Automatically track balances of inventories at multiple farms, and multiple warehouses at each farm.  Check out/check in inventory management for managed store-rooms.

Farm inventory app by Farmsoft delivers precise farm inventory control, reduce farm inventory waste and shrinkage, track farm inventory to individual employees, farm inventory stock-take, farm inventory traceability.

The farmsoft farming app delivers special attention to each client – dedicated solution consultants, project management, remote or on-site training and deployment – guarantee a quality solution. Enterprise farmsoft can be installed on your own server or accessed from farmsoft cloud – your choice. We can make additions and changes farmsoft Enterprise to ensure it meets your exact requirements. farmsoft Enterprise provides rapid R.O.I. for fast growing professional farms.

Farm Budgeting app
Create farm budgets quickly, detailed for each individual crop batch, plan inventory, labor, and equipment use, quantity, and cost. Monitor actual costs versus estimated farm costs.
Farmsoft delivers budgets for every section, subsection, patch, block, and crop instance. Budgets generated even go to the detail of specifying a particular brand and make of inventory to use, on a precise date. This unique feature sets farmsoft apart from other ‘farming solutions’. 
Easily create farm budgets for the entire farm, no matter how many varieties you are growing, and regardless of the number of plantings.

Make your farm a lean manufacturer by improving JIT delivery and accuracy of materials ordering by using farm budgeting data to project the quantity of inventory, labor, and equipment resources
Financial decisions can be improved by having access to comprehensive budgeting information before each season commences.

Easily project materials and inventory consumption
The Farm Budgeting modules reduces the risk of cash flow shocks, while maximizing your farm’s cash flow position by planning ahead using the budgeting information produced by the Farm Budget module
Contact your nearest farmsoft consultant to discuss your farm budgeting requirements.
Farm budgets create estimates for the cost and quantity of labor, equipment, and the date that the resource will be consumed or applied
Easily detect when farm budgets have been missed, and take corrective action quickly to protect cash flow position.

Compare actual farm costs with estimated farming costs at any time in real time using live budget data
Analyze farm budget figures (estimated) and actual figures grouped by land, produce, farm, site, produce type, or variety; or any combination of those selections.
Farmsoft farm inventory software reduces inventory waste, shrinkage, and ensures traceability. Farmsoft Farm Inventory software delivers new ways to increase accountability of farming materials & inventory, and ensures reduced production costs farm-wide, resulting from lower waste and shrinkage.

The Farmsoft inventory software provides a high level of accountability of production materials, allowing multi-site, multi warehouse tracking of all farming materials at all times. Access to accurate stock take information of all farm materials is critical for improving ordering accuracy and cash flow. Shrinkage or waste can be easily detected and traced back to operational areas, departments, or employees, allowing the farm to maximize return on investment for all materials.

Reduce farm inventory waste
Increase inventory accountability
Reduce waste and increase the accuracy of inventory allocations to specific cost centers.  Enhanced traceability reduces business risk
Contact a farmsoft consultant today for a free farm inventory consultation.
Easily allocate traceability information for all inventories, allowing rapid recalls and traceability processes to meet the highest international farming and food safety standards. Simple stock-take processes ensure continual accuracy of stock-take information across the entire farm.

Optionally allow ad-hoc creation of inventory on the fly, this feature allows rapid creation of inventory records during the farm task record gathering process. Traceability is still maintained to a high level for clients using this feature. This feature reduces administrative requirements and expedites record keeping. You can easily disable this feature from the farmsoft Settings module. Install the farmsoft Farming App to go mobile with your farm inventory management today.

Inventory can be accessed based on an employee’s site permissions, allowing management to provide access to only selected inventory at selected sites to a specific employee. 
Farm diary app

The Farm Diary is the central hub for easily planning, monitoring, and managing all farm activities and recording farm records.

Easily view activities across multiple farm areas, multiple farms, and multiple geographical locations from the Farm Diary. Farm record keeping has never been easier, with customizable Task Types that can be configured to match your farm record keeping requirements. Download the brochure and watch the two videos on this page.

Promotes rapid management response, and improves farm profitability via on-screen alerts and smart monitoring & observation systems.

Quickly identify potential problems and take corrective action immediately
reduce farm risk via accurate & effortless recording of traceability information during and after task execution.

Helps to improve communication between farming employees and teams via integration with task management tools, alert systems, and by providing real time updates to farm management
promotes rapid management response, and improves farm profitability via on-screen alerts and smart monitoring & observation systems.

Quickly identify potential problems and take corrective action immediately
reduce farm risk via accurate & effortless recording of traceability information during and after task execution.

Helps to improve communication between farming employees and teams via integration with task management tools, alert systems, and by providing real time updates to farm management
farm record keeping.

The Farm Diary archives all farm records for rapid access in the event of a fresh produce recall. Maintaining farm records is essential for a very high level of farm traceability. The farm diary makes capturing farm records from your phone, tablet, PC/Mac easy. 
Farm Land Management made easy for fruit, vegetable, hop, flower, and coffee farms. Easily define farming areas provides permanent traceability records for historical inputs.
Better farm land management is at your fingertips via the ability to rapidly look-up total inputs into a selected area of land, inputs can be reported by date range of input, input type (ie: a specific product), or even farm, site, area, or material supplier. Download the full farmsoft Farm Software specification now.

Define sites, farms, block, block area, row, bay, crop batch ares of land, even number individual trees if required
Assign land areas to each Crop for the life-cycle of the crop.

Automatic calculation of estimated crop life-cycle based on best practice values
Record each planned instance of a crop planting (this later becomes a Crop when seedling inputs are recorded)
Configure average life-cycle for every variety of produce.

Include maps, soil analysis, water analysis and other documents with each area of land.

Farm land management made easy. Record, retrieve, and analyze documents, maps, and other critical land management data.
Farmsoft guides employees through farm quality control tests. Enforce farm quality control using a smartphone or tablet – anywhere, anytime.
Farmsoft delivers extensive and flexible quality control checking systems that meet international farm quality control standards. Configure tests based on ISO, BRC, farmsoft, Cropsure, or create your own farm quality control tests.

Farmsoft’s extremely flexible farm quality control solution allows the configuration of virtually any farm quality control test, such as “spray checklist”, “employee performance checklists”, “safety equipment checklist”, “pre-harvest crew checklist” and more.

Integrate your farms quality management system (QMS) into farm quality control processes and record them from your phone, tablet, PC or Mac. You can even integrate your farm quality control with farmsoft’s fresh produce quality control for fruit processing and packing.
Adhere to international farm quality control standards such as BRC, HACCP, GlobalGAP, ISOx, and other standards
Perform farm quality control from smartphone or tablet (iPad, iPhone, Android).  Employees can capture photos and comments during the performance of a test.  
Farm Traceability can make or break a farm, it’s no longer an ‘optional’ regulatory requirement – implement the best farm management software now….

Farmsoft farm traceability features allow the easy capture of farm traceability records for any agriculture or horticulture based enterprise. Download sample farm traceability reports now! Farmsoft farm traceability features help to reduce risk exposure for your business by minimizing the potential size of fresh produce recalls, and enforcing best practices for farm traceability at all critical control points across the farming business. Download farmsoft specifications now.

Contemporary commercial fruit, vegetable, hop, flower, and grain farming has become increasingly regulated over the past decade. There are now thousands of farm traceability regulations that relate to the traceability and food safety in the production of fruit and vegetables for human consumption. Farmsoft farm traceability features provide an easy to use traceability solution by integrating the worlds most common food safety and traceability practices into the every day operations management of the farmsoft Farm Software.


Farmsoft Farm Software provides a strong platform for accurate recording of traceability information, via a variety of easy and logical methods. Risk exposure to the farm is greatly reduced by having highly granular traceability, which in turn reduces financial exposure to the farm should a recall become necessary. Accurate traceability reduces the quantity of fruit/vegetables in a recall, and therefore reduces the farms financial exposure. Best practice standards for farming such as BRC, Global GAP, ISO, Bio-Terrorism (and many more) are supported by the system, making audits less expensive, and compliance costs lower.
The traceability systems in farmsoft Farm Software constitutes thousands of processes that are integrated throughout the entire crop record keeping modules, forcing users to record correct traceability details at the correct time. Farmsoft Farm Management ERP minimizes the data capture and entry costs associated with traceability using various innovative techniques.
Vertical farming solutions for sustainable food production in an sustainable environmentally friendly manner.
By 2050, the world’s population is expected to grow by another 2 billion people, and feeding it will be a huge challenge. Due to industrial development and urbanization, we are losing arable lands every day. Scientists say that the Earth has lost a third of its arable lands over the last 40 years.

We don’t know how much more we are going to lose in the next 40 years. Increasing food demand due to a growing population along with ever decreasing arable lands poses one of the greatest challenges facing us. Many believe that vertical farming can be the answer to this challenge. Is vertical farming the future of agriculture? Let’s find out!

What Is Vertical Farming?
Vertical farming is the practice of producing food on vertically inclined surfaces. Instead of farming vegetables and other foods on a single level, such as in a field or a greenhouse, this method produces foods in vertically stacked layers commonly integrated into other structures like a skyscraper, shipping container or repurposed warehouse.
Using Controlled Environment Agriculture (CEA) technology, this modern idea uses indoor farming techniques. The artificial control of temperature, light, humidity, and gases makes producing foods and medicine indoor possible. In many ways, vertical farming is similar to greenhouses where metal reflectors and artificial lighting augment natural sunlight. The primary goal of vertical farming is maximizing crops output in a limited space.


How Vertical Farming Works
There are four critical areas in understanding how vertical farming works:

1. Physical layout,

2. Lighting,

3. Growing medium,

4. Sustainability features.

Firstly, the primary goal of vertical farming is producing more foods per square meter. To accomplish this goal, crops are cultivated in stacked layers in a tower life structure. Secondly, a perfect combination of natural and artificial lights is used to maintain the perfect light level in the room. Technologies such as rotating beds are used to improve lighting efficiency.

Thirdly, instead of soil, aeroponic, aquaponic or hydroponic growing mediums are used. Peat moss or coconut husks and similar non-soil mediums are very common in vertical farming. Finally, the vertical farming method uses various sustainability features to offset the energy cost of farming. In fact, vertical farming uses 95 percent less water.
Advantages and Disadvantages of Vertical Farming
Vertical farming has a lot of promise and sounds like the farm of the future. However, there are a few stumbling blocks to consider before rushing full-speed ahead into vertical farming.

Advantages
It offers a plan to handle future food demands
It allows crops to grow year-round
It uses significantly less water
Weather doesn't affect the crops
More organic crops can be grown
There is less exposure to chemicals and disease
Disadvantages
It could be very costly to build and economic feasibility studies haven't yet been completed
Pollination would be very difficult and costly
It would involve higher labor costs
It relies too much on technology and one day of power loss would be devastating
VERTICAL FARMING TRACEABILITY HAS NEVER BEEN EASIER
Instant traceability recalls, with 100% accuracy. Trace fruit & vegetables back to a grower, area of land/field, crop batch/patch and all inputs and their related suppliers & batch/lot details. If you use farmsoft Post Harvest software for tobacco processing, you can even trace product all the way to customers and invoices.

VERTICAL FARM PLANNING MADE EASY, REDUCE FARMING COSTS
Easy with auto creation of tasks to guide teams through the best farming processes. Plan the entire years tobacco crops with just a few clicks! Reduce administration and traceability costs costs by collecting data during farming, reducing the burden on the admin team, and delivering automatic reporting without needing to compile reports manually.

ENFORCE BEST VERTICAL FARMING PRACTICES
Farm tasks can be created automatically, you check their accuracy and adjust them if the weather or other conditions change. The farming team is guided through farm tasks ensuring work is done at the right time using correct materials, and compliance data is captured at every critical point.

PASS AUDITS WITH EASE
You know that feeling you get in the pit of your stomach when you know the auditors are coming the next day? Forget about about it. Using farmsoft, you have the confidence that you can do instant recalls, and generate any traceability, farm summaries, and farm records in a matter of seconds.

AUTOMATIC BUDGETS & COST MONITORING
View costs in real time, down to a specific patch/block, or by farm site, crop, and variety. Never have production cost shocks again. Budgets are automatically created by the best practice system and allow projections for any period of time into the future, down to the application of a specific spray chemical or fertilizer.

INTEGRATION WITH POST HARVEST SOFTWARE
Optionally use farmsoft Post Harvest packing solutions that seamlessly integrate with the vertical farming software for a complete enterprise management solution. Learn more here.
VERTICAL FARM TRACEABILITY
Compliance with international GAP and food safety standards allows easy crop recalls, traceability, and pesticide and controlled substance monitoring and reporting.
Farming app to enhance profit, quality, and yield in the fresh produce farming industry. Only for professional farming organizations.
The farmsoft farming app is part of a comprehensive business management suite, in which you can optionally incorporate farmsoft Fruit Packing & distributions solutions as well. Much more than just a simple farming app to help you perform farm record keeping, the farmsoft suite can manage every part of the business from pre-planting planning and budgeting, through to processing, sales, and traceability management.

You can use the farmsoft farming app from virtually and device, and access your entire farm management system and reports remotely. This allows many offices to use the same system easily, and gives useful monitoring abilities to management that may be offsite or traveling.

Comprehensive farm management functionality allows management of all facets of fresh produce farming and cultivation.

Farmsoft farming apps are also multi-site and multi company enabled. You can define an unlimited number of ‘farms’ that will use the one farming solution, however, when each user access the system, they can only see information from their own farm/s. This also gives superior centralized management and monitoring for corporate farming, and sharing centralized agronomy resources.


Farm inventory app by Farmsoft delivers precise farm inventory control, reduce farm inventory waste and shrinkage, track farm inventory to individual employees, farm inventory stock-take, farm inventory traceability.

Farmsoft fresh produce farming app is for fruit & vegetable farming.  Full fresh produce farm task management, traceability, auditing, inventory control, and fresh produce business management app.

Quality inspection for fresh produce

Consistent and accurate quality control ensures higher customer satisfaction and adherence to industry, de-facto, and in-house quality control standards. Track supplier quality performance, customer feedback & complaints, create QC tests for any part of the fresh produce & food manufacturing process (incoming goods, raw materials, finished goods, expiry test, export/shipping tests), daily factory hygiene, machinery calibration, employee checklists... * 

Fresh produce logistics

Manage orders, pack to order, picking and auto picking, dispatch & shipping process. Generate invoices, bill of lading, pick slips, export documentation and other sales documents... Dispatch teams are guided through the dispatch process ensuring every order is filled perfectly, and on time. Paperwork such as BOL, freight documents, export documents are automatically generated based on the customer and destination to guarantee no rejected shipments or issues at borders. *

Fresh produce labels

Generate fresh produce SSCC pallet labels, GS1 case & PTI labels, bin labels, batch labels, traded unit labels, harvest labels and more. Use the built in industry standard labels for Walmart, Woolworths, Aldi, Tesco, Loblaws etc - or design your own with the built in label & report designer. Our team can design all of your fresh produce documents to ensure farmsoft matches your requirements perfectly. *

Fresh produce packing control

Sales, Quality, Profit, Dispatch, Pack, Farm...... Dashboards for sales teams provide instant impressions of customer orders and current inventory levels. The dispatch dashboard helps plan shipments, order of loading, and transport companies & drivers... The Profit analysis dashboard shows margins per unit and most profitable customers. Use our API to access your data however you like. * optoinal

Fresh produce batch packing

Project required raw materials needed to pack/manufacture orders, potential shortages, schedule multiple orders to be packed in batches on selected production lines with a few clicks, automatically send new job alerts to managers, schedule additional harvests, analyze outstanding orders. Manage entire packing and manufacturing process with ease. *

Fresh produce alerts monitoring

Automatic alerts for shipments can be sent to customers, transport providers, or even team members. Every time a batch is finished processing, receive an alert with the pack-out breakdown and percentages of grades & quality and waste. Alerts can include simple shipment notifications, or even invoices and original order details. Other alerts include order changes/modifications, yield reports, new order alerts, and low inventory alerts... *

Improve fresh produce production planning

Efficient management customer orders, and the ability to analyze orders gives you new production planning tolls in farmsoft. Ensure each order is filled to exact specifications, on time, every time. Increase customer satisfaction and retention, and reduce stress in the packhouse with confident production planning using work orders/batch orders, sales contracts, sales orders, and sales order items. Are you manufactruing or processing chili products? Try farmsoft for chili processing. 

Accurate fresh produce traceability

Quality officers are guided through the quality control process, presented with images and instructions for each test, ensuring they know what to look for at all times, corrective actions are presented if a quality issue is detected. This makes training new fresh produce quality control officers fast, and ensures consistency in the quality control management processes for incoming fresh produce, post pack/post processing, storage, and dispatch. 

Efficient use of fresh produce cold stores

Maximize your cold store use and rotation of stock using farmsoft's pallet maps, and precision traceability tracking with expiring inventory reminders.
Cold store management software for fruit importers, exporters, packers, cross docking, and short and long term fruit storage.

Farm inventory app by Farmsoft delivers precise farm inventory control, reduce farm inventory waste and shrinkage, track farm inventory to individual employees, farm inventory stock-take, farm inventory traceability.

Farmsoft farm inventory software reduces inventory waste, shrinkage, and ensures traceability. Farmsoft Farm Inventory software delivers new ways to increase accountability of farming materials & inventory, and ensures reduced production costs farm-wide, resulting from lower waste and shrinkage.
The Farmsoft inventory software provides a high level of accountability of production materials, allowing multi-site, multi warehouse tracking of all farming materials at all times. Access to accurate stock take information of all farm materials is critical for improving ordering accuracy and cash flow. Shrinkage or waste can be easily detected and traced back to operational areas, departments, or employees, allowing the farm to maximize return on investment for all materials. Downloadfarmsoft Farm Inventory specifications now.

Reduce farm inventory waste
Increase inventory accountability
Reduce waste and increase the accuracy of inventory allocations to specific cost centres
Enhanced traceability reduces business risk
Contact a farmsoft consultant today for a free farm inventory consultation.


Easily allocate traceability information for all inventories, allowing rapid recalls and traceability processes to meet the highest international farming and food safety standards. Simple stock-take processes ensure continual accuracy of stock-take information across the entire farm.

Optionally allow ad-hoc creation of inventory on the fly, this feature allows rapid creation of inventory records during the farm task record gathering process. Traceability is still maintained to a high level for clients using this feature. This feature reduces administrative requirements and expedites record keeping. You can easily disable this feature from the farmsoft Settings module. Install the farmsoft Farming App to go mobile with your farm inventory management today. Farmsoft farm inventory management software includes the following features:

A farm inventory is a list of assets - anything of value - that can be sold. The inventory list can include the price of the item, the value of the stock, the year it was bought, the expected lifetime and the depreciation in value.

How to Make an Inventory
An inventory is generally done at least once a year and involves the counting of everything on the farm, including hectares of land, tons of grain in stock, animals and so on. The inventory will also include the money value in Rand of the assets.
Walk around the farm and make a general inspection of farm assets. Make a list or spreadsheet of items according to main categories such as buildings, land, machinery, equipment, farm supplies and stock.
Details on a Farm Inventory
An inventory usually contains the following details:
Size of the farm, the right of ownership, the size of land that is used for agriculture and a valuation of the production unit.
Description and valuation of fixed improvements such as a new borehole or roof.
Vehicles, machinery and equipment, as well as numbers and types or models.
Numbers and types of livestock.
Stocks, farm supplies and production inputs such as seed, fertiliser.
Finished and semi-finished products at the beginning and end of the financial year.
In separate columns of the inventory indicate the following:
The year when each item of property was purchased.
The purchase price of each item.
The expected lifetime of machinery/equipment.
Then calculate the annual depreciation for each item using the straight-line method or the reducing-value method.


Inventory can be accessed based on an employee’s site permissions, allowing management to provide access to only selected inventory at selected sites to a specific employee.This feature is especially useful for farms that have multiple sites that are geographically isolated from one another
Perform stock-takes directly onto the smartphone/tablet/PC or print stock-takes for manual paper then PC entry
Stock-takes can be performed at a site, warehouse, or category or subcategory level, allowing easy division of important inventory from less important
Create purchase orders to acquire inventory
Receive inventory (from a purchase order, or simply receive inventory without a purchase order)
Assign estimated costs to inventory where no purchase orders are being used, and where no incoming inventory is being recorded – this information is used by the Budgeting system to estimate costs
Traceability information can be recorded on incoming inventory. For farms that do not record the traceability details of inventory upon physical delivery, the traceability details of inventory actually used will be recorded when farm tasks are recorded
Print Inventory ID Labels
Traceability relates back to many facets of the inventory including supplier, supply date range, supplier batch details, purchase order number and more
Balance of all inventory is available at all times, and can be viewed by site, farm, warehouse, inventory category or subcategory
Alerts can be generated by the Alerts system when an inventory item has a low balance, the alert level is individually set for each inventory part
Inventory can be easily moved between different farms and warehouses
The movement history of inventory is continually and automatically recorded in the background
Manage all inventory including production materials, chemicals, fertilizer, seedlings, and planting materials
Set PHI (Post Harvest Interval), withholding period, and re-entry periods for individual inventory parts
Perform mobile inventory stock-takes using the mobile interface via phone and tablet
Perform historical stock takes, report on inventory that was on hand on a specific date (as opposed to live inventory stock takes). Handy for accounting and finance management.

Farm Management: The Importance of Inventory Management

Running a successful agribusiness is not easy. To achieve profitable and successful production, farmers have to be skilled in various aspects of farm management. In other words, they have to be successful managers, accountants, consultants, and scientists who are very good at performing all types of field activities. Luckily, we live in the era of modern agriculture in which farmers can rely on smart AgTech solutions to keep accurate records and manage their farm operations. Despite advancements made in AgTech software, one thing can significantly determine the success of crop management and farm operations – that’s inventory management.

Table of Contents
What is Inventory Management In Farm Management Software
Poor Inventory Management Leads to Cash Flop
Still Don’t Have a Suitable Inventory Management Software?
Easily Manage Your Inventory With Farmsoft
Digitalize Your Farm Management Today
What is Inventory Management In Farm Management Software
Inventory – in simple words it means keeping inventory levels, raw materials and other products accounted for and in stock. For example, agricultural inventory, includes various fertilizers, pesticides, fuel, or seeds that farmers use in their production.

Although it doesn’t sound like a big deal, healthy farm inventory management is one of the most important habits of a successful small business. Multiple aspects of agricultural production are closely related to inventory management. These are activity planning and execution, activity record keeping, ensuring complete production traceability, and planning seasonal budget.

Poor Inventory Management Leads to Cash Flop
Occupied with their daily field operations, farmers often forget that healthy inventory management is a very important aspect of their production. The consequences of poor inventory management can be significant to both farm productivity and profitability. The most common example of how inventory management impacts the success of crop production is at the time of crop sowing.

Every farmer knows that most crops, especially arable, need to be sown or planted at a specific time of the year. In order to provide the best conditions for crop growth, sowing needs to be performed during that specific period. If growers start sowing wheat and then suddenly realize that they are running low on seed stock, they need to pause sowing and make the purchase. Meanwhile, certain unfavorable conditions may occur. There is a huge possibility of a rain period and lower temperatures that can greatly impact the germination as well as the final yield.

Sowing a field with a tractor for optimal growth
Another common example of poor inventory management is during the harvest period. Without insight into the real-time inventory stock levels, farmers can’t prepare an adequate quantity of bags, boxes, or pallets for fruit storage during the harvest. The time needed to make a purchase of stocks prolongs the time of harvest, thus affecting the fruit quality and final yield.

These two examples mentioned above are just a drop in the ocean of similar situations of improper farm inventory management.

Still Don’t Have a Suitable Inventory Management Software?
Growing crops means that there are certain farm activities constantly in progress. However, many of them require tracking inventory stock levels. In other words, farmers have to be completely prepared for each activity. Otherwise, every lack of stock may lead to an additional delay in performing activities. Having the inventory software system capable of automation goes a long way in ensuring that doesn’t happen.

Easily Manage Your Inventory With Farmsoft
Farmsoft is a state-of-the-art farm management platform revered in the agriculture industry. Its core features include an inventory management system capable of managing multiple warehouses in different locations and having real-time insight into every product on stock. To avoid the lack of stock and a supply chain disruption or additional production delays which impact crop yield, there is a possibility of setting alarms. These will notify farmers once the stock reaches a specific low value. By using Farmsoft, farmers can get two most important values for successful management of their farm production:


Contact a farmsoft consultant today for a free farm inventory consultation.

Step 1: Business Inventory
Business Planning -- Business Inventory: Inventorying Resources and Describing the Current Business


The farmers, lenders, and farm management instructors who cooperated in developing these educational materials agreed that like any planning process, farmers need to know where they are before they can decide how to proceed. This and the next several steps are an opportunity for farmers to consider their current business, their personal interests and skills, and the economic environment for their farm business and agriculture.





An inventory of a business often includes information about 1) the type and quantity of business assets and their productive capacity, 2) current practices, and 3) the business' financial strengths.

Objectives of Step 1

Describe the business' resources and current practices

Assess the performance of the business

Compare the business with peer businesses

Needed to Complete Step 1

Production and financial records

Enterprise analysis

Financial statements

Peer benchmarks

Results of Step 1

Description of business assets and productive capacity

Summary of current enterprises and management strategies

Comparision of performance to peer businesses

Assesment of business' capacity to assume risk

This Step Involves

This web page suggests questions farmers may consider and a procedure they may follow in developing an inventory of the current farm business. The inventory will include a summary of the farm's resources, a description of its enterprises, and an assessment of its financial status. Activities in completing this step will likely include:

describing the current farm operation in terms of types and quantities of commodities generally produced, and total acreage (owned and leased),
developing a list of non-land assets owned or leased by the business, and describing their productive capacity,
outlining the quantity, type, and availability of human resources,
summarizing the types and quantities of inputs used to produce each commodity (including owned assets), and describing production and marketing strategies/practices,
analyzing each enterprise by assessing its production efficiency in terms of
the dollar value of inputs and the dollar value of production,
return to the owner's labor, management, risk, and equity, and
comparing current production to past production and production by peer firms.
listing the business owners, the farm assets each owns, and the method of compensating them for allowing the business to use their assets,
assessing the overall farm business by
comparing availability of inputs to what is needed, in terms of quantity and timing,
developing up-to-date financial statements (cash flow statement, income statement, and balance sheet),
comparing the current situation with past financial situations and the financial situation of peer firms, and
measuring the farm's capacity to assume risk.
This Step Does Not Involve

Subsequent steps in the planning process offer opportunities to

consider the owners' willingness to assume risk,
specify assumptions and expectations about the industry and economy,
assess the long-term feasibility of the current farm,
identify resources in the community that may be incorporated into the farm business, and
develop alternatives for the farm business and assess their feasibility.
This Step May Extend Over Several Years

The remainder of this web page suggests a series of activities for inventorying a farm business. Farmers should not expect to complete all of the activities the first time they attempt this step; there is too much information. Instead, farmers should expect to initially expand the documentation they already have, such as financial statements and a depreciation schedule. Then each year, they can enhance their description of the business. After several efforts, farmers will have a complete description of their farm. Adult farm management instructors indicate that it is not uncommon to take three years to develop a thorough description and understanding of a farm business.

Enterprise and Whole-farm Analysis

Inventorying a business can encompass two major analyses. One analysis focuses on each of the individual pieces or enterprises that comprise the business. The second analysis concentrates on the entire business; that is, the whole-farm . Most farmers are more familiar with a whole-farm analysis than with enterprise analysis. However, enterprise analysis allows farmers to recognize the level of profit being earned by each enterprise, and commit resources to enterprises that move them closer to their ultimate goal (as discussed in step 4 -- Setting Personal and Business Goals ). The analytical processes described in this manual focus on individual enterprises and the whole-farm.

Example. A cow-calf/small grain producer was certain that the livestock enterprise was profitable and that the crop activities were marginally profitable, if at all. However, the enterprise analysis revealed that the livestock activity was unprofitable while the crops were generating a positive return. Further analysis of the livestock enterprise revealed that the cost of replacement stock was too high relative to alternative strategies for maintaining the herd. Armed with this information, the farmer addressed/resolved this previously undetected problem.

Primary and secondary enterprises

Farmers often initially describe their operation according to the commodities they produce or the enterprises they operate. For example, a farmer may indicate the primary enterprises with a statement such as "I (we) operate a _______" and fill in the blank with a phrase like "small-grain farm," "wheat and cow-calf operation," "potato and durum farm," or "feedlot."

Farmers usually follow such a statement with a more complete list of commodities they produce or enterprises they operate. Identifying each commodity or enterprise, whether it is a primary or an ancillary activity for the farm operation, reduces the likelihood that secondary enterprises are overlooked when analyzing the current farm business and considering its future potential.

Land Resources and Productive Capacity

Land often is a second characteristic farmers mention in describing their operation. A complete inventory of land usage would indicate the acreage that is

owned and operated,
owned but leased to other farmers, and
leased from other owners.
Land leased from others is included in the inventory because it is being used in the farm business. Land leased to others also is inventoried because the owner may have the alternative of operating it after the lease expires. Another common practice is to categorize land according to whether it is cropland, pasture, or has some other use.

A summary of the acreage used in the farm's primary enterprises also can be helpful; for example, 400 acres of wheat, 250 acres of corn, and 590 acres of pasture. But secondary products or uses should not be overlooked, such as straw for bedding, fall grazing, or fee hunting. The inventory also may indicate the typical yield for each of the products. Past production records are valuable in completing this activity.

It can be helpful to briefly describe the characteristics of each tract. The description probably begins with information about the number of acres in cropland or pasture, but since the emphasis during the planning process is on selecting a strategy for operating the farm in the future, the inventory also should report what can be produced on the land. This production potential is referred to as the land's productive capacity.

Relevant questions in assessing land's productive capacity may include what other commodities could be produced on the land, could the pasture/hayland be used to produce a crop, could the cropland be used for grazing, and could the land be improved (perhaps drained or irrigated). Brief responses to such questions provide a more complete description of the land. Likewise, this vision begins to lay the foundation for considering alternatives in later steps of the planning process. For example, farmers may want to identify possible by-products from the production processes and consider whether the by-products can be used on the farm or sold.

Another example of describing the productive capacity of an acre of land would be that it is able to annually produce 45 bushels of wheat, 60 bushels of barley, or 2 tons of hay, rather than only being described as having a market value of $600 per acre. Computerized mapping systems, based on soil type and other production considerations, are becoming "the norm" in assessing land productivity. Other considerations in describing land resources might include distance to trade centers, pest problems, legal restrictions on use, and the base acreage for participating in federal government farm programs.

Additional information for leased land would include the rental rate and possible duration of the lease. Information about the book value, market value, and encumbering liens further describes owned land. Some of the information for owned land may already be documented on the owners' balance sheet or other financial statements.

The attached worksheet suggests a format for organizing some of this information. However, farmers are strongly encouraged to customize the form or develop their own to best meet their needs. There is no right or wrong way to present the information.

Owners of farm businesses that do not rely on extensive acreage, such as a feed or seed processing plant, or a feedlot/confinement livestock operation that purchases needed feeds, may find it more useful to develop a description of that primary enterprise than to spend considerable time detailing their land uses. Capacities or alternative uses for the facilities may be part of the description.

Inventory of Equipment and Buildings

The next activity can be developing a list of all non-land assets used in the business. The depreciation schedule already lists equipment and purchased breeding livestock, and is a good document with which to start this process. The farmer would add to this schedule:

equipment and purchased breeding livestock that have been fully depreciated,
raised breeding livestock, and
non-breeding livestock.
Farmers who maintain a detailed balance sheet may have much of this information already compiled, in which case, a copy can be inserted in the manual as part of this section.

Like land, the inventory of equipment could include an assessment of the asset's productive capacity. For example, a farmer does not own a tractor so it can be sold for $37,000. Instead, the farmer owns a tractor to use it in the farming operation; perhaps to complete 1,000 hours of work each year. If the farmer, during a later step of the planning process, selects enterprises that annually require 1,500 hours of work from that tractor, the farmer will have to make some changes.

Another example of productive capacity of equipment would be a tractor and drill that can be used to plant 150 acres of grain in one day. This is somewhat different than thinking about the machines as having an undepreciated cost of $32,000 or a resale value of $45,000. If the normal planting season is about 12 days, the farmer would be able to seed 1,800 acres (150 x 12). Plans to expand the operation to 2,400 acres of small grains would indicate that the present seeding capacity is likely to be inadequate.

Additional factors in describing equipment could include alternative uses for the equipment; other enterprises in which the equipment can be used; and the age, state of repair, acreage capacity, ease of transporting, useful life, and obsolescence of the equipment. Encumbering liens that may restrict disposition of the equipment also could be part of the inventory.

In assessing livestock buildings, relevant questions may address capacity and condition of facilities for housing, feeding, livestock handling, feed processing, feed storage, and waste management. The availability of water also is an important consideration. Factors considered for a grain enterprise could include capacity and condition of facilities for storage, processing, handling, and drying.

General farm buildings, such as the farm shop and machinery storage, could be gauged according to their capacity to meet current and future needs (especially as equipment sizes continue to increase). Such an assessment also will likely consider the buildings' age, state of repair, and potential for expansion or refurbishing. These factors secondarily influence value but primarily influence what and how much can be produced, or which tasks can be accomplished.

Like land leased from others, leased equipment and buildings should be inventoried since they are part of the farm's productive capacity.

Livestock Inventory

A detailed description of livestock often is helpful. For breeding livestock, information about their age, projected productivity, death rate, cull rate, and replacement rate provides a more complete description of the herd than just the number of head and their current market value. For feeders, relevant information may include death rate, a summary of their general state of health, likely rate of weight gain, and feed efficiency.

By considering productive capacity farmers are thinking about what they can do with the assets rather than just measuring quantity and dollar value. Productive capacity focuses attention on productivity, and reinforces that the value of an asset reflects "what and how much" is expected to produce during the asset's remaining useful life. Different production practices and varying uses of resources are considered in step 6 when alternatives for the farm operation are identified.

Production and Supply Inventory

Farm businesses almost always have an inventory of goods. Last year's grain stored for sale would be part of the production inventory . The quantity, quality, and market value often are critical since this type of asset generally will be used only as a source of cash revenue.

Farm businesses also may have an inventory of supplies/inputs that will be used to produce another commodity on the farm. Hay raised for feed and fuel stored in the farm tanks fall within this category, even though one was produced on the farm while the other was purchased. The dollar value of these items may not be as critical as the fact that there is enough hay (measured in terms of quantity and quality) to feed the breeding herd for six months, and enough fuel to till and plant 400 acres in the spring. A description of supplies would likely specify quality, quantity, alternative uses, and restriction on uses (such as grain subject to a Commodity Credit Corporation loan). Again, some of this information may already be part of a detailed balance sheet.

In describing purchased inputs, farmers generally include inputs that are invested in growing crops, such as fieldwork completed last fall or chemicals and fertilizers already incorporated into the soil. In addition, the inventory could include inputs that have been purchased and paid for, but not delivered (commonly referred to as prepaid expenses).

Available Labor--the Human Resource

Labor is an important asset not listed on the balance sheet or depreciation schedule. A business inventory perhaps should include information such as

how many people are working in the business,
when and for how long they are available (such as full-time, summer months, weekends, evenings),
their talents and skills (see step 2),
their level of management or supervisory skills (see step 2),
which skills should be improved (see step 2),
their tasks,
their rate of pay, and
how the availability of this labor might change in the future (such as a teenage child leaving home in several years, a family member retiring, or an adult child leaving an off-farm job and being available full-time).
Developing an inventory of available labor poses some unique challenges for several reasons

labor is not a homogenous commodity, each worker has different skills and talents;
labor can be quantified using different measures;
extra labor cannot be readily stored for use at a later time; and
labor is necessary to utilize most any other resource in the business (such as equipment).
The following paragraphs provide a few suggestions for overcoming the challenges.

A farm inventory may have categories of available labor skills, such as equipment operator, livestock handler, craftsman/mechanic, or manager. The farmer may further sub-divide or categorize skills; for example, management could be subdivided into areas of production, marketing, financing, and interpersonal skills (which could include supervising and negotiating). Since all successful farms need to perform these tasks in varying degrees, the process of inventorying the farm's available labor may develop such categories.

Some managers may measure their available labor in terms of hours; for example, several workers will provide 150 hours of labor each week. Assessing labor on an hourly basis requires that labor needs (as addressed in a subsequent section) also be measured by the hour. An alternative measure of labor is workdays; that is, one person working an entire day provides one workday of labor and a task that takes one person one day to perform requires one workday of labor.

A description of when labor is available can be accomplished with further categorizing. A worker who is available in morning provides a different type of labor than someone who works in the afternoon; this may be critical to a livestock farm with chores that need to be completed at a particular time each day. Alternatively, labor provided by workers during weekdays could be categorized as different than labor provided on weekends. For example, an individual who is not available during weekdays may not be the person to assume responsibility for meeting with firms/agencies that are open only "40 hours" a week.

A broader category for the timing of labor would be the seasons. Crop producers may want to distinguish labor available in spring from that which is available during the summer or fall. Having a large supply of labor during the summer when most is needed in spring and fall does not assure the business will complete its tasks in a timely manner. The farmer has to decide the best method of describing when labor is available but categorizing labor according to time is one procedure to accomplish that. The issue of timing will resurface throughout the planning process.

Another challenge could be documenting the labor of an individual with several skills. For example, a multi-skill person could spend 11 hours in a day's time completing management tasks, or 11 hours operating equipment, or 11 hours handling livestock, or 11 hours doing any combination of these tasks; but the person could not spend more than 11 hours working that day. Subsequent steps of the planning process offer an opportunity to revisit this question; therefore, it may be adequate in this step to indicate that the individual's skills are available in any combination but the total is limited to the time the person has for work activities.

Resources Needed to Operate the Farm

The activities of this step, thus far, have focused on what resources are available. The next activities concentrate on the resources necessary to operate the present farm. After compiling these two sets of information (available resources and needed resources), farm owners are prepared to assess which resources are inadequate and which are under-utilized. In either case, some changes in the farm business may be necessary.

Enterprise Budgets

Developing a description of each enterprise is one procedure for compiling a record of what resources are used in operating the farm. A component of the description would be an enterprise budget that includes information about the quantity produced and the revenue generated. Some enterprises produce several sources of revenue. For example, a wheat enterprise could generate income in the forms of grain sale, government program payments, crop insurance benefits, straw, and fall grazing.

A detailed description of each enterprise also would include a list of inputs, the quantity used, cost per unit of input, and total cost for the input. For example, in producing wheat, a farmer may use 60 pounds of dry fertilizer per acre at a cost of $220 per ton for a fertilizer cost of $6.60 per acre. This information could be thought of as the "recipe" the farmer follows in producing the commodity.

Some farmers will conduct more than one enterprise analysis for some commodities. For example, multiple analyses are needed when the operator uses different technologies or levels of input to produce the commodities. A corn enterprise that follows a strategy of "minimum-tillage and high fertility" is distinct from one where corn is produced using "conventional-tillage" practices. Farmers will want to analyze the profitability and feasibility of each "recipe" to understand which one best utilizes their resources.

It is important that the enterprises be described as specifically as possible so the analysis accurately reflects the farmer's business. Otherwise in later steps, the farmer will be making decision based on faulty data for their business. It is for this reason that farmers cannot use general descriptions or budget values that are developed by others.

Crop enterprise budgets often are prepared on the basis of one acre whereas livestock enterprises often are on a per-head basis. An advantage to preparing enterprise budgets on a per-acre or per-head basis is the ease of changing the scale of the enterprise by multiplying by a different number of acres or animals. Such an approach, however, assumes that the productivity of each acre or of each animal varies little from the average. However, some farmers have or are developing records in sufficient detail so their budgets reflect variation among fields or groups of livestock, rather than assuming that each field or group is equally productive.

One challenge in developing an enterprise budget is to identify and measure all inputs being used, including resources provided by the owners and family members. For example, farmers generally are not paid a regular wage for their efforts and this may cause them to overlook the value of their labor in the analysis. An enterprise that generates $20 of profit and requires 3 hours of the owner's labor may be more desirable than an enterprise that generates $30 of profit but requires 10 hours of the owner's time. Later steps will provide more ideas on how to assess alternatives; but in completing this inventory, farmers are encouraged to specify all resources used to produce their commodities.

The enterprise analysis worksheet (page 4 of the worksheet) contains a line labelled "Accounting Profit (return to owned resources)." The amount in this line is the difference between revenue and the costs that have to be paid. The return is the amount that the farm owner has left, or the amount the farmer earned from having invested in the business. The investments may have been

equity in land, equipment, buildings, or livestock,
cash,
the owner's labor, and
the risk exposure the owner accepted.
With this information, the owner can begin to assess whether the return is adequate considering what the owner has invested.

Opportunity Cost

The next several lines on the worksheet (page 4) provide space for the owners to specify a cost they will charge themselves for using some of their investment. For example, farmers may charge a rent for the land they own and use in their business. The cost business owners impose on themselves for the use of their own resources is referred to as opportunity cost . The definition of an opportunity cost often is stated as "the amount of income I am giving up when I use this asset in my business." For land, a question to ask in determining an opportunity cost could be "how much rent am I not receiving because I use my land in my business rather than leasing it to another business owner?"

An alternative definition could be "the amount of income I want to receive in return for using my resource in this activity." This definition allows the asset owner to consider their own values. For example, a farmer may want to receive $10 per hour for operating a crop enterprise but would want $15 per hour to handle livestock, because the farmer does not like animals. Each person likely could present several examples of when they would impose a different opportunity cost depending on the activity in which the resource is being used. Regardless of the definition used, farmers need to understand the cost of using their own resources in their business.

Another question that arises with this analysis is deciding which resource should have an opportunity cost imposed. It does not matter, except if there are particular goals the farmer wants to reach. One suggestion is that the owner could impose an opportunity cost on the resource the owner considers most important in terms of earning a return. Then, any amount remaining after subtracting that cost is the return to the other owned assets.

Example. If the farmer was to charge for the labor the farmer provides to the business, the amount remaining after subtracting an opportunity cost for the labor would be the farmer's return for all other owned assets. The farmer could then ask "if I am paid for my labor, does the business generate enough revenue to justify investing my other assets in the business?"

By imposing a cost for some owned assets, the farmer is better positioned to decide whether to continue or change the current farm operation. This analytical step, however, does not change the amount of revenue the farmer receives since an opportunity cost (labor, in the previous example) does not require a cash payment to another person. This step is only an analytical method to help the farmer better understand the farm business.

Cash Flow for the Enterprise

The last column on the enterprise analysis provides space to indicate the cash flow of operating the enterprise because it will be different than the revenue or costs. For example, harvesting straw after wheat harvest so it can be used as bedding does not generate cash even though it is a product from the enterprise. The straw has value in the revenue column but does not have any amount in the cash column. Depreciation is a cost that does not require cash. Principal payments on debt is an example of a cash outflow that is not a cost. Recognizing these differences helps farmers understand their businesses.

Description of the Enterprise

A budgetary summary is not adequate to fully describe an enterprise. The description also should include a summary of processes used in operating the enterprise. For example, in a livestock enterprise, the summary could indicate the ration, medications, and production technology being used, as well as when each practice is performed. For crop enterprises, the description would likely indicate field operations, the equipment used for each operation, the length of time it takes to complete each operation, when the operation is performed, and whether production of the commodity involves participation in a government program.

Additional information for most enterprises also could address the marketing strategy, the timing of cash flows, risk exposure, and labor needs. Operators who follow a documented marketing plan can include a summary of the plan as part of this section in the manual; otherwise, a brief description of how the commodity is marketed would be a good start. Later steps in the planning process offer an opportunity to refine these strategies/practices. Similarly, quantifying and managing the risk exposure is addressed in a later step.

Timing of Resource Needs

Having resources available when they are needed is a key element to successfully operate any business. Cash flow, labor, and production operations (such as field work) are perhaps the management issues most directly impacted by timing. The following discussion uses cash flow as an example because most farmers are familiar with procedures to analyze whether cash needs match its availability. However, the analytical principles and related issues also apply to labor and production operations.

A cash flow statement provides information as to when cash is needed and when it is received. Generally cash flow statements are developed for the entire farm (a whole-farm analysis) as addressed in a subsequent section. However, to develop a whole-farm analysis, each enterprise is implicitly or explicitly considered. Farmers ask themselves "when am I likely to sell my commodities" and this is usually answered differently for each commodity. Presumably, farmers think about cash flow on an enterprise basis even though they may summarize the information onto one sheet of paper for the entire farm. Page 5 of the worksheet provides space to indicate when the enterprise generates a cash inflow or requires a cash outflow.

Developing a whole-farm cash flow is necessary in order to see the "big picture." But when alternative enterprises are considered (as will be done in step 6 of the planning process), the whole-farm analysis will be partially dismantled to replace the cash flows of discontinued activities with the cash flows of new enterprises. Having documented the cash flow of each enterprise may ease the replacement process because the assumptions made in developing the original cash flow statement would be more explicit. Knowing the timing and size of cash flows are critical in managing a business.

This type of detailed analysis is equally important in assessing the impact of alternatives on the timeliness of labor and production operations. Again, the level of information necessary to develop and document such a thorough understanding of the business will likely take several years to assemble.

Labor Needs

Describing the types and timing of labor needs poses many of the same challenges faced in documenting the availability of labor, and thus similar strategies may be beneficial. The same categories could be used for labor needs as were used for labor availability; for example, equipment operator, livestock handler, craftsman/mechanic, and manager. Alternatively, labor needs could be categorized according to whether the activity is indoors (so weather is not much of a factor), outdoors but not involving field work, and field work (perhaps the activity most sensitive to weather).

Farmers find it helpful to use the same measurement for labor needs as they use to document labor availability (such as hours or workdays). Also, distinguishing categories of labor on the basis of time helps assess the adequacy of this critical component. An approach similar to a cash flow statement perhaps can help in understanding the timing issue for labor. A similar timing analysis can be conducted for equipment, building, and land resources.

Later in the planning process, farmers have an opportunity to consider alternative combinations of enterprises. Some of the criteria for selecting enterprises will include profitability (does the enterprise earn an adequate profit) and feasibility (do the cash and non-cash resources necessary to operate the enterprise match with what is available to the business). Recognizing the need for and beginning to gather the detailed information required to answer these questions should ease the process of analyzing alternatives in later steps.

Matching Whole-Farm Resource Availability with Needs

At this point, the farmer has recorded resource availability and resource needs by enterprise, and is now ready to shift back to a whole-farm analysis. However, totaling the dollar amounts or number of units from all enterprise may not be the total for the farm. Some costs or needs that have not been allocated to an enterprise must also be included. For example, the cost of maintaining the farm office or the fee for tax preparation may not have been allocated among enterprises. Similarly, the time necessary to maintain the farmstead or to attend educational meetings may not have been allocated. These unallocated costs/needs should be added to the totals of the enterprises to arrive at a total for the whole-farm.

With the whole-farm totals, the farmer can search for opportunities wherein the enterprises complement one another. For example, a whole-farm cash flow statement that summarizes the cash inflows and outflows, would document that the cash generated with livestock sales would be timely for paying crop production expenses. With this information, the farmer can document when cash needs to be borrowed and when there may be a surplus with which to pay debt, purchase supplies, or meet extra family living costs. Labor can be similarly analyzed; the farmer can determine the amount of labor needed throughout the year and the amount available. By comparing these quantities, the farmer is able to recognize when labor may be in short supply or when there may be some unused time.

The strategies for addressing inadequate or excess supply of a resource will vary depending on the resource. For example, a difference between cash and labor is that cash can be stored and moved from one time period to another by borrowing, repaying, prepaying, and saving. Labor, if not used, is lost. The primary opportunities for managing labor is to hire part-time workers when labor is short and discharge workers or seek alternative employment when labor is not fully utilized. Another practice is to add an enterprise that profitably utilizes excess labor, or perform tasks ahead of time (such as completing equipment maintenance during the winter months). Subsequent steps in the planning process offer opportunities to consider alternative strategies for managing resource availability and needs.

Despite the efforts, a detailed analysis of the match between resource availability and needs often is difficult. It may be best, the first time through this step, to only conduct a preliminary analysis by describing, based on recall of past experience, which resources were in short supply or under-utilized, when during the year the situation arose, the extent to which there was a shortage or surplus, and how the situation was managed. This description then can be enhanced over time as the farmer more closely monitors and records resource mismatches and why they are occurring. Perhaps answering questions such as those listed below would be helpful in preparing a preliminary analysis.

In the past:

what resources have been in short supply?
what time of the year were they short?
why were they in short supply?
how did you accommodate the shortage?

what resources were under-utilized?
what time of the year were they under-utilized?
why were they under-utilized?
what did you do to increase their utilization?
Current Practices

Another part of describing the current farm operation is to explain present practices or strategies. Production and marketing strategies/ practices have been described for each enterprise, but there may be other areas that pertain to the overall farm business that have not yet been documented. These could include

how is the current farm operation financed, how much of the cash operating needs are met by drawing upon savings, how much is being borrowed, who are the creditors, and when is the operating loan normally repaid (financing strategy),
when are major capital assets acquired, when are they disposed of, how are their purchases financed, and what is the criteria for deciding whether to acquire or dispose of a major asset (capital budget),
how is available labor being managed; what is the practice for assigning tasks and providing feedback on performance (labor management),
what strategies are followed for managing risk exposure (risk management),
what is the owners' strategy for managing income and self-employment taxes (tax management).
Some strategies may be quite informal at this time, but a short description is a first step to developing a more thorough description. Others practices may be quite formal and well-documented. In that case, including a summary of the plan in the manual would be appropriate. Later steps provide an opportunity to refine these practices/strategies into functional plans for future operations.

Current Ownership

Another aspect of the current farm is to identify who are the owners of the business; that is, who is authorized to make decisions and who is legally responsible for paying obligations if the farm operation does not generate enough cash to meet all its expenses. A related question is what assets do each of these business owners own? For example, one or two individuals may own a majority of the land while ownership of some equipment is shared by all. In addition, other pieces of equipment may be owned by an individual. A clear record of current ownership can be helpful in understanding the present farm business.

Likewise, the description of the business could include an explanation of how the owners are compensated for their investment in the business. It is not uncommon for the owners to share the profit on the basis of their contributions. However, in other farm business, the owners receive the equivalent of a wage for their labor and divide any remaining profit in proportion to their asset ownership. There are innumerable ways to divide the farm earnings to compensate the owners. This question will be revisited during later steps and initial explanations of current practices will be helpful at that time.

Owners also may want to describe how they assign responsibilities and authorities. In some farm businesses, individuals are identified as being in charge of specified enterprises. In other co-owned farms, the owners hold regular meetings to share information and make collective decisions. Again, the practices vary and are innumerable, but a description of your current practice will be helpful in completing later steps.

Inventory of Financial Assets

Information about the financial results of each enterprise and physical assets does not describe the whole-farm business. An understanding of the farm's overall financial situation requires key financial documents: the balance sheet, the income statement, and the cash flow statement. Financial statements help assess the financial well-being of the overall farm. The whole-farm cash flow statement is discussed in a prior section. This section will introduce the balance sheet and income statement, but focus on how to use the information from these documents.

The balance sheet summarizes the values of the firm's owned assets and liabilities. The difference between the two totals is the owners' equity (net worth). Leased assets are not included in the balance sheet because the farmer does not own them (even though these assets are part of the farm's productive capacity).

One question that arises in preparing a balance sheet is what values should be used. Frequently used valuation methods include:

historical -- what the asset cost when it was acquired,
market -- what one could sell it for today,
replacement -- what one would have to pay to acquire a replacement today,
book value -- the historical cost minus depreciation.
For various reasons, farmers and their lenders often use market value whereas accountants generally prepare a balance sheet using the asset's book value. An increasingly common practice is to prepare a balance sheet with two columns of values; one for book value and the other for market value.

Some farmers develop more than one balance sheet. One balance sheet is to reflect their business; another balance sheet is prepared for their personal situation. Differentiating between personal and business assets helps to recognize which assets are part of the business and which are outside the business. Two balance sheets also separate business debts from personal debts. Similarly, it may be necessary to prepare several balance sheets to show the portion of the farm that is attributable to a co-owner of the business.

A completed balance sheet shows information, such as the total value of assets, total indebtedness, equity, available cash, and value of liquid assets. This information can then be analyzed to determine the business' current ratio, its borrowing capacity, and opportunities to attract equity capital. It also provides insight into the business' capacity to assume risk.

An income statement reports the amount of profit the business generates. Usually income statements are prepared on an annual basis. An accrual income statement often provides a better measure of the farm's performance because it considers changes in inventory, rather than only cash transactions. It is for this and other reasons why an income tax return should not be relied on as measuring the farm's profit.

A cash flow statement reports the sources and uses of the business' cash resources. Such statements not only show the change in the farm's cash resources over the year, but also when the cash was received or spent. As discussed previously, an understanding of the timing of cash receipts and expenditures is critical in managing the whole-farm. Neither an income tax return nor an income statement provide the same information as a cash flow statement.

The discussion on this page assumes that the financial management expertise necessary to compile these statements is available to the farmer. Likewise, detailed explanations of these statements are available from numerous sources, such as

Iowa State University: Ag Decision Maker
University of Illinois: FarmDoc FAST tools
Management consultants and adult farm management instructors also are sources of such information or expertise.

Using the Information from Financial Statements

Compiling the financial documents from the past years is useful because they reveal trends or patterns. Comparing the current statements to past statements reveal what has been happening to the business' financial situation. The balance sheets show changes in owner's equity and risk exposure (whether they have been increasing, decreasing, or remaining the same); the income statements reveal trends in profit; the cash flow statements can help the farmer understand the timing of cash availability and needs.

The three financial statements also can be used to prepare financial ratios that show the strength of the business. Common financial measures include the firm's debt/asset ratio, return on farm assets, and net farm income. The Farm Financial Standards Task Force has developed standardized farm financial factors, measures, and reporting formats that farmers can use to understand their farm business. These standards are summarized on pages 7 through 9 of the pdf file of this NDSU report. The solvency ratios, for example, reveal the business' level of exposure to financial risk.

The financial ratios can be used to make several comparisons. First, the current performance of the farm can be compared with its historical performance. Second, the farm's performance can be compared to that of similar farm businesses. Numerous public and private sources of farm financial information that can be used to compare the farm business are becoming available. Agricultural Economics Report "Financial Benchmarks of North Dakota Farm Operators: 1993 Update" North Dakota State University, is one source of such information.

A third relationship is to compare the performance or profitability of the enterprises within the farm business. A fourth comparison is to relate the performance of the business to what had been previously projected or budgeted. This comparison helps farmers understand how and why the actual outcome of the business differs from what they had expected. A fifth comparison can be made between the performance of the farm business and non-farm alternatives. This last comparison identifies opportunities, if any, that are lost or relinquished because one has invested their time and capital in owning and operating a farm.

Available Capital and Capacity to Attract Capital

Farm businesses need capital to operate, to enter into new ventures, or to expand the firm. A properly prepared balance sheet reports the amount of cash and other liquid assets available to meet cash needs. However, most businesses have access to more cash than what they currently possess or realize. Nearly all businesses can borrow additional cash, and the capacity to borrow (often called a credit reserve ) is an asset. Similarly, the ability to attract investors is an asset that deserves to be recognized. The capacity to acquire additional cash allows a business to undertake new or expanded activities.

Assessing a business' ability to attract additional capital may be difficult without someone who is willing to lend or invest. The financial ratios and how they compare to similar farms provide some indication of the business' credit reserve. Likewise, a visit with a lender may offer insight into the size of a farm's credit reserve.

Implicit in this consideration is the cost of capital, that is, the rate of interest the business must pay a lender or the return that must be paid to an investor. The higher the interest or dividend rate, the less capacity the firm has to acquire additional capital; thus the market interest rate directly influences a business' credit reserve.

Capacity to Assume Risk

The opportunity for the business to earn a profit requires assuming some risk. Although not described as a business asset, the ability and willingness to assume risk is critical. Types of risk a farm business encounters include production, price, and financial. A farm likely will differ in its capacity to assume each type of risk exposure.

Ability (or capacity ) to assume risk differs from a willingness to assume risk, but either can limit the risk exposure a firm accepts. A farmer's willingness to assume risk is discussed in the next step-- Skills and Interests . Farmers who recognize and prudently use their capacity to assume risk are likely to enhance their chance for financial success.

One way to consider a farm's capacity to assume risk is to describe it as a chain with five links.

The first link is net earnings as a percent of the value of the farm production, which shows the farm's capacity to absorb losses resulting from reduction in yields or price.
The second link is the working capital of the farm business; this indicates if the business has sufficient cash flow (and current assets) to cover operating losses that occur in the first link.
The third link is current debt repayment capacity, which shows the farm's ability to rely on a carryover operating loan to finance operating losses.
The fourth link is owner's equity, which is the business' ability to sell assets to restructure its finances.
The last link is collateral, which is the legal right to the owner's equity.
If any one of these links is weak, so is the chain; that is, the farm's capacity to assume risk.

Related to the ability to assume risk is the desire or willingness to control risk exposure through insurance or alternative strategies. Perhaps one rule of thumb on assuming risk could be "if the activity prevents you from sleeping at night, you may not want to pursue it." Methods of assessing and controlling risk are explored in subsequent steps.

Closing Observations

The last step in describing the current farm operation may be to document a few of your thoughts, overall reaction, feelings, or observations about the current business. Questions to consider may include

which activities have been most successful for you?
are there areas of the business you would like to expand or discontinue?
what are the strengths of the business?
what are the weaknesses of the business?


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