About this time of year, some pesky bookkeeper starts asking how much grain is in the bin? How many cows? How many calves? How many bales?
It is the end of July and Sherri is busy doing year end. Like any business there are financial books. It doesn’t matter when your year end is, the bookkeeper will ask the how many and at what value questions.
Year end inventory and valuation are considered short term and current assets. Hence they as used as part of the balance sheet. For all businesses, not just farms, current assets are used by a multitude of purposes (banks, loans, government programs, census, etc.)
Estimating the value of current inventories at year end lets us do a projected budget. This can help us plan expenditures, like salaries or capital purchases.
Records are important for any business, and there are many different types. Producers need inventory numbers not only for bookkeeping purposes but also for management.
- Do we have enough winter feed? For a normal winter and if snow comes two weeks early? How many bales are there? How many bushels of barley? Do we need to buy pellets? ( Well this year we just ordered some pellets)
- Do we have enough bin space? If we anticipate a large harvest we will need to find alternatives.This year we bought more bins.
- Counting cattle throughout the year gives productivity measures such as reproductive efficiency and death loss.
Herd health – If we count cattle when we check them, we get an idea of how many animals we have seen that day. If we see 90% three times in a row, does that mean the last 10% have been missed every time and are sick or have we seen 100% of the animals? Did some animals get out of the pasture? If we count when moving animals we can be sure that no animals have been left behind, or are stolen, sick or dead.
Comparing the count from the baler with the person who hauled the bales both people get a good idea of how many bales of each kind there are and where they went. It also gives an estimate of yield.
Multiple counting of the same item gives everyone confidence in the answer. Knowing how much storage you have for grain and how many loads you are taking off a field gives management the flexibility to efficiently use storage space. If we don’t count how many loads they have taken off a field, everyone is left guessing and storage challenges can arise unexpectedly. This year we have implemented the use of a grain cart. Among other things this equipment has a scale that weighs the grain from combine to cart and from cart to truck. This gives us better information on yield and means better marketing data.
Inventories are a necessary part of doing business. Hence, everyone is counting. Counting bales from first cut hay, accounting for grain in bins, counting cattle in the field. Everything must be accounted for.