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.
Planning Organizing Directing Controlling Management
The Best Decisions Require the Best Information Management Control
Uses and Purposes of Financial Records Management Decision Making Income Tax Reporting Credit Acquisition
Keys to Successful Record Keeping • Simple yet Useful
Excessive detail often ends in Confusion, Frustration, and Failure Keys to Successful Record Keeping
Keys to Successful Record Keeping • Meet your Needs, Abilities, & Limitations
Know your Purpose for Keeping Records Keys to Successful Record Keeping Management Income Taxes Banking
Standards of Communication Accounting Rules
Generally Accepted Accounting Principles (GAAP) Accounting Rules
Accurately Match Expenses with Income Keys to Successful Record Keeping
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
Accrual Adjusted Income Statement • Cash incomes and expenses must be adjusted by: • Changes in non-cash assets • Inventories • Pre paid expenses • Receivables • Changes in non-cash liabilities • Payables • Accrued interest
Basic Set of Financial Statements Financial Analysis Requires
Basic Financial Statements • Balance Sheet • Income Statement • Statement of Owner Equity • Statement of Cash Flows
Assets = Liabilities + Equity Equity = Assets - Liabilities
Beginning Balance Sheet Ending Balance Sheet Assets Liabilities Assets Liabilities Equity Equity • +/- Net Income • +/- Valuation Changes • Capital withdrawals • + Capital contributions
Basic Set of Financial Statements Understanding of how to Analyze and Interpret the Financial Statements Financial Analysis Requires
Ratio Analysis • Liquidity • Solvency • Profitability • Financial Efficiency • Repayment Capacity
Objectives Measure Financial Condition Financial Analysis
Objectives Measure Financial Condition Measure Financial Performance Financial Analysis
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 performance-enhancing 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