Tepap Day 4 Bonus – Mike Scott Interview – Accountability

Accountability

I recently had the opportunity to interview Mike Scott over the phone and give him an opportunity to expound on some of his ideas from the seminar. One of those is a model with a box of accountability and box of tolerance. The goal is to shrink the area of non-performance and expand the box of accountability in your organization.

Hope you enjoy the conversation.

TEPAP – Day 3 “Selling and Accountability”

On Day three we made a shift from the mechanics of the business to development of leadership skills. The afternoon speaker was Mike Scott. His theme was developing a totally accountable organization.

I think this topic is especially important in family run businesses. Often we let things slide between family members that wouldn’t be tolerated in other settings. Here are few of the key points he made.

  • Accountability is a culture
  • Culture drives everything in your organization
  • Don’t cheat people out of winning because you won’t hold them accountable to higher standards.
  • Whatever is not being discussed in a relationship is controlling the relationship.
  • Completion of tasks creates energy and momentum.

You can find more resources on Mike’s website.

In the morning, we heard from David Parker on the topic of salesmanship. These skills are essential for leadership when working with employees, vendors, landlords or serving on committees. We spent some time looking at sales from the buyer’s perspective as much as the seller. I made the following notes as we proceeded through the presentation.

  • Focus on listening and uncovering true needs.
  • Even if you are actively listening, you will only remember about 50% of what was said.
  • Think through what the objections will be and how you will handle them before you meet with someone.
  • Preparation before the meeting is the most important part of any sales process.

One theme that started to develop was to focus on preparation in everything you do. Often times when running our businesses, we get tied up with day to day operations and don’t allow time to prepare for the upcoming appointments, meetings, or employee management. Focusing on the little things add up to huge gains in productivity and effectiveness. All in all, this was a great day to transition us towards more strategic thinking that came later in the week.


TEPAP – Day 2 Jim Nolen

For anyone that has attended TEPAP, the days get long and conversations run late into the evening so I’m a few days behind on my posts.

The first speaker on Monday was Jim Nolen from the University of Texas. One of the key points he made is public companies get feedback from the market. For private companies, the only place to get financial feedback is from their accounting systems and managerial accounting is critical to provide that.

He also made a good distinction between accounting and finance. Finance is generally focused on managing the balance sheet while accounting focusses on the P&L. He emphasized the need to understand the relationship between the balance sheet and desired growth rate. Growing too fast can kill a business when sales grow faster than the balance sheet can support that growth. For many operations, this will probably be their downfall in the next couple of years.

We also had a discussion on relationships with your banker, especially during tough times. As someone who has served on bank boards, he gave us some good advice on working with your lender during times when margins are tight.

I had a chance to get his comments after his discussion and you can listen to those here.

Jim Nolen Inteview

The second speaker was Peter Zeihan who gave us an overview of world geopolitics. His big message was that the United States is positioned to be the world leader for several decades.  The two driving factors behind that are people and energy.   Demographic trends throughout the world are working against most countries as their populations are aging and their won’t be young people coming into the work force to support social programs or spur economic activity.

The second factor is energy.  The United States is in the process of disengaging from the rest of the world because we are functionally energy independent and no longer dependent on the middle east.   The rest of the world due to debt levels and shortage of energy in the future will be in a much weaker position than America.  

For agriculture specifically, he was bullish on American agriculture in the medium to long term because we will have access to capital and resources which won’t be guaranteed for the many agriculture producing regions.  If you would like to read more, you can get his book entitled THE ACCIDENTAL SUPERPOWER

Time For New Accounting Software?

Is the new year time for new accounting software?   Before ditching what you have been using, let me offer some observations from my past experience.

Tip #1:  Define the users and reports needed first.

Start first with defining the users of the information and what type of information they need.   Be specific on the frequency of reports, roles of users, reason for the reports, and why you are doing this.   This will help really define what is needed vs. what looks good on a spec sheet.

This process should include both internal and external users of the information.   Here is an example of what that process may look like.
Continue reading

Fun on Friday: Beauty and Hope in Egypt

When you think of the Middle East, you don’t think about pictures like the one below, but rather violence, the rising threat of ISIS, and the possibility of a nuclear armed Iran.  However, there is another story going in Egypt we don’t hear much about.

Today, I want to give you some beautiful pictures to look at, but also give you a place to go for hope in that part of the world.

Egypt

51 Reasons To Fall In Love With Egypt

I’m fascinated by other cultures and found the pictures here stunning.

The Bigger Story:  Where Radical Islam Was Defeated

I ran across this blog that gives a perspective on what has gone on in the country over the past few years.  Our western press hasn’t covered it much, but when it has it has painted the events there as overthrowing a democratically elected government which is true, but not the whole story.

They have gone through two major changes of governments. The first was the first democratic election that brought the Muslim Brotherhood to power.

The 2nd one is the one that is most fascinating in that 30 million protestors overthrew a democratically elected government that didn’t live up to its promises.

Think about that for a second. Egypt has a population of about 86 million people.

If we translated that to the United States, a similar protest would involve over 100 million people or about 1 in 3 people.

Amazing… In their own way, they had a Boston Tea Party on steroids.

(Light at the End of the Tunnel)

Have a good weekend, I’ll be back next week with some posts on accounting.

Dave

Trial Balance – First Report Used By CPA’s

If you provide a Quickbooks or other electronic file for your tax preparer, chances are the first report they look at is the trial balance report. When opening a set of books from a client, especially if that entity is a corporation or partnership, the first thing the tax preparer wants to see is if the previous year’s account balances match what was used on the tax return.    The trial balance simply gives the debit or credit balance for all accounts on the day the report is run. The following picture is an example.

Trial Balance, Quickbooks

Trial Balance Example from Quickbooks

 


Often times, those balances do not match.  When that is the case, someone needs to make an adjustment to reconcile the differences.

Here are just a few things we have seen that can throw those balances off when working with clients over the past 10 years.

  1. A check that was written, but then voided in a new year because the payee did not cash it.
  2. Checks or deposits that are entered with the wrong date putting that income or deduction in a previous year.
  3. Unreconciled transactions that are later deleted because they were double entered or incorrectly entered.
  4. Going back to edit the details or splits on a deposit or check that changes the accounts that were used.

Trial Balance and Other Year End Action Items

At the end of the year, we recommend three things to archive the records. Continue reading

“Why Do My Accrual And Cash Reports Look Identical?”

Most accounting software programs allow reports to be run both accrual and cash reports.  Often times a client or prospect will ask me why the reports look the same.

In order to show differences, you first have to have a way to show two different dates for the transactions, a cash date and an accrual date. The most simple way most software programs do this is through the use of forms. The general rule of thumb is if you enter a transaction once and are done with it, it will be the same on a cash and accrual report.

The following image is from Quickbooks, but most software follows a similar process.

The red numbers show either a 1 step (cash) process or a 2 step process (accrual) expense transactions. The blue numbers show the same example for income.

By splitting the transaction into two forms, the software is able to split the date of when the transaction occurred from when it was paid, hence cash and accrual reports. Continue reading

Fertilizer Prices Not Following Grain Prices… Yet!

One of the biggest questions I am getting from clients is, “Do I buy fertilizer now or wait for lower prices?”   Most clients are assuming that fertilizer prices will be lower due to falling commodity prices.   That is exactly what happened when we came out of 2009 and went into 2010.  Fertilizer prices had spiked higher and farmers cut back on applications going into 2010.  As you can see from data provided by the USDA, all products fell significantly.

Fertilizer 2008 to 2013 prices

Source: USDA

 

DTN tracks fertilizer price trends and is a good place to look  for price trends.   According to DTN, 7 of the 8 major fertilizers used in row crop operations are higher than a year ago, some significantly.  Here is a summary of the price trends mentioned in the article.

Product

Change from 2013

Urea

+13%

DAP

+12%

NH3

+12%

10-34-0

+8%

MAP

+6%

UAN28%

+5%

UAN32%

+1%

Potash

-2%

Markets have a funny way of bringing supply and demand back into balance. I suspect the market will push prices lower before they go higher in 2015.

Dave

 

Tax Day 2014

Today seems like the perfect day to launch a new website related to farm accounting.   For most farmers, their tax deadlines seldom fall around April 15th, but it is a great reminder that tax planning is a critical component of farm accounting.   Over the next few weeks, months and years I will share some tips, tricks and traps that I’ve seen working with various clients and tax preparation firms.

We will also explore various accounting related topics like office procedures, use of spreadsheets and general business issues related to the farm.   Thanks for visiting and please be sure to sign up for our free newsletter to keep up to date on the latest posts and material.

David