In their articles from the October 2009 issue of AgFocus, Jerry and Collin make excellent cases for the important role that measuring performance plays in successfully managing a farm business. Jerry and Collin mention dairy herd management factors such as milk production, somatic cell counts, pregnancy rates, lameness scores, and calving difficulty among others as candidates for measurement. Objectives and goals based upon dairy herd management factors are certainly important for guiding the business.

As a farm business owner, you have financial objectives and goals, written hopefully or unwritten. These, too, direct your efforts. Do you measure the financial condition of your farm business using the balance sheet? Do you measure financial performance using the cash flow statement and income statement? If you don’t measure financial management factors, then how do you expect to successfully manage the business toward achieving desired financial results?

Again the statement “If you can’t, or don’t measure it, then you can’t manage it” with its emphasis on measuring underlies the value and need for sound financial management.

As the end of the year draws near, the next few months present good opportunities to examine your business’ financial management practices. See the article in this issue titled “Get More from Your Farm Business’ Financial Record Keeping System” to guide your examination of financial management practices.

Some additional details for two farm business summary and analysis tools follow. Business summary and analysis are key financial management practices.

Cornell University Cooperative Extension’s Dairy Farm Business Summary (DFBS) Progam

• The objective of the DFBS Program is to allow producers to analyze their production and financial situation, set future goals, and make sound financial decisions.
• The DFBS also allows producers to compare their business performance to that of other dairy producers.
• The summary and analysis for each farm includes profitability analysis, balance sheet analysis, an analysis of the annual cash flow and repayment ability, capital and labor efficiency as well as an analysis of the cropping and dairy aspect the business.

Financial Statements for Agriculture (FISA) Program

• FISA is a computer based spreadsheet program that can be used by all types of farm businesses to achieve an objective similar to the one above for the DFBS Program.
• FISA’s ability to provide for peer to peer comparisons is limited.
• The summary and analysis for each farm includes profitability analysis, balance sheet analysis, an analysis of the annual cash flow and repayment ability, as well as some capital efficiency measure and analysis. The program does not summarize and analyze production aspects of the business.

The DFBS program is the preferred financial management tool for summary and analysis for dairy farm businesses.

If you are interested in improving your farm business’ ability to practice sound financial management, then please contact me to learn more about some of the tools available and their value and, or to discuss plans for completing a farm business summary and analysis for your farm business for 2009.
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