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.
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
Compare the business with peer businesses
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
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.
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.
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.
Labor Needs
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.
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:
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.
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.
Farmsoft delivers the best farm inventory management solutions. Use our farm inventory management app to go mobile – from your smart phone or tablet. Agriculture inventory software made easy!
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.