Management Information Systems

Terry DeGroff Burwell, Nebraska

Books, Records & Controls

Management is…
• Planning, organizing, directing, and controlling a business. The most important and challenging is control… the process of analyzing, evaluating and interpreting the production and financial performance of a business.

Information…
• Can and does come from many sources. Some of the best and most needed information can come from each business’ own financial and production records.

Systems…
• Need to be implemented that allow for only necessary record keeping and effective use of records. Summary information from these records should be invaluable in day to day business decisions.

Management
• Planning • Organizing • Directing • Controlling

Management Control
• The Best Decisions Require the Best Information

Uses and Purposes of Financial Records
Management Decision Making Income Tax Reporting

Credit Acquisition

Keys to Successful Record Keeping

Keys to Successful Record Keeping
• Simple yet Useful

Keys to Successful Record Keeping
• Excessive detail often ends in Confusion, Frustration, and Failure

Keys to Successful Record Keeping
• Meet your Needs, Abilities, & Limitations

Keys to Successful Record Keeping
• Know your Purpose for Keeping Records
Management Income Taxes

Banking

Accounting Rules
• Standards of Communication

Accounting Rules
• Generally Accepted Accounting Principles

– (GAAP)

Keys to Successful Record Keeping
• Accurately Match Expenses with Income

Cash and Accrual Accounting
Refers to the timing of entries into the accounting system

Cash Based Records
Transactions are recorded when cash is received or paid out

Accrual Based Records
Transactions are recorded when they take place Regardless of whether cash is involved

Accrual Adjusted Statements
Cash based records are kept throughout the year Non-Cash adjustments are made to the cash based income statement at the end of the year

Cash incomes and expenses must be adjusted by:
• Changes in non-cash assets
• Inventories • Pre paid expenses • Receivables
• Payables • Accrued interest

Accrual Adjusted Income Statement

• Changes in non-cash liabilities

Financial Analysis
Requires
• Basic Set of Financial Statements

Basic Financial Statements
• • • • Balance Sheet Income Statement Statement of Owner Equity Statement of Cash Flows

Assets = Liabilities + Equity Equity = Assets - Liabilities

Beginning Balance Sheet
Assets Liabilities

Ending Balance Sheet
Assets Liabilities

Equity

Equity

+/- Net Income +/- Valuation Changes - Capital withdrawals + Capital contributions

Financial Analysis
Requires
• Basic Set of Financial Statements • Understanding of how to Analyze and Interpret the Financial Statements

Ratio Analysis
• Liquidity • Solvency • Profitability • Financial Efficiency • Repayment Capacity

Financial Analysis
• Objectives
– Measure Financial Condition

Financial Analysis
• Objectives
– Measure Financial Condition – Measure Financial Performance

Financial Analysis
All business owners should have a basic set of financial statements at their disposal and they should know how to analyze and interpret them.

Profitable Management of the “Extensive” Enterprise
• Forage-based cow/calf production has long represented a management paradox. Very high investment requirements per dollar of output provides a strong incentive to increase output per head (thereby reducing investment per dollar of output). Unfortunately, this ever-so-tempting objective has been regularly frustrated by the low economic responsiveness to performance enhancing technology. In short, it simple has not paid to manage beef cows or perennial grass with the same “intensity” as we do with more intensive enterprises like dairy cows, hogs, and row crops.

Profitable Management of the “Extensive” Enterprise
• In extensive enterprises (such as the commercial cow/calf business), we seldom find it profitable to maximize yield per acre or performance per animal. Rather than “pouring on the technology”, we must recognize the nature of the brute, live harmoniously with nature, and make a very discriminating use of yield or performanceenhancing technology. In brief---we generally have to finesse a profit.

Profitable Management of the “Extensive” Enterprise
• Output maximization may approximate optimal management for intensive enterprises. However, optimal management of the extensive enterprise comes closer to input minimization.

V.E. Jacobs, 1984

A Paradox
• Farmers believe they benefit from agricultural technology…but they don’t • Consumers don’t believe they benefit…but they do

Technology is….
• Productivity enhancing • Management intensive • Capital intensive • Not scale neutral

The End

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