Records: A True Accounting – Spreadsheets aid management decisions

From financial recordkeeping to tracking management decisions, Ted Foster excels at crunching the numbers

By Susan Harlow

Ted Foster has never met a spreadsheet he didn’t like. You can understand why: There’s a lot of data to mine and manage, between Foster Brothers Dairy, the 400-cow dairy he co-owns with seven family members; and Vermont Natural Ag Products (VNAP), the family’s compost and soil amendment business. Both are located in Middlebury, Vt.

Foster uses business management software, Sage Peachtree Accounting, to assemble financial information. He downloads the data into Excel spreadsheets for up-to-the-minute pictures of how the businesses are doing and to make management decisions.

Using accrual accounting for each of several enterprises – dairy, crops, calf raising, VNAP – Foster is able to generate financial statements easily and quickly. It shows him how expenses and income in each enterprise are running for the current month, the previous month, last year and the current year to-date, as well as on a per-hundredweight basis, which makes it easy to compare his dairy to others in Farm Credit East’s annual benchmarking program

“I like it because I can tell where I am each month, and especially at the end of the year,” Foster said. “Cash accounting could look really good or really bad, but it wouldn’t be a true accounting of what the situation is at the moment. That’s the beauty of accrual accounting.”

The chart of accounts he uses is almost infinitely dividable, depending on what information he might need, and it makes accounting consistent. Once he set up the chart of accounts, Foster said, it was easy to post bills daily as accounts payable, using the lists of vendors already in the accounting system. Accounts receivable works the same way. Foster Brothers, for instance, sells hay, and Foster can generate invoices and quickly see who owes them and how much.

Then, at any time, Foster can bring up a list of accounts payable or receivable. Because most of the income and expenses are accrued during the current month, he can generate a balance sheet easily. “One problem with accrual is that the milk check arrives a month late for that month’s milk,” Foster said. Previous months statements can’t be closed out until the milk check arrives on the 20th.

Cropping is one enterprise Foster is still wrestling to move to accrual accounting, which accounts for financial events when the transaction is made, not necessarily when payment is made or received. “I would like to get crops into inventory and then account for them when they’re taken out and used or sold. But I can’t get a good handle yet on how to calculate shrink and bunk inventory.”

At the end of the year, Foster generates a spreadsheet projecting cow numbers, pounds of milk and milk price (based on Agri-Mark Inc.’s projections) for the following year, then fills in budget numbers, based on per-hundredweight costs

Spreadsheets are particularly useful in determining if a management change has worked out by measuring the results. “It’s all a matter of what numbers you want to track,” Foster said.

For example, when he thought the dairy was spending too much on teat dip, he broke out that expenditure under dairy supplies and began keeping track. He saw that if he could buy teat dip in bigger containers and change how the dairy fills dippers, using a power pump to fill them directly from the container, there would be less waste. His financial spreadsheets showed him he could justify building the addition needed to store those larger containers.

Take the issue of storing feed. Foster’s feeding spreadsheet tracks date, cow groups, the time groups are fed, pounds of refusals, and the percentage of programmed feed fed out.

“The feeder can look back and see how much cows ate,” Foster said. “He can see how much has been fed vs. the inventory, and how much should have been fed.”

He also has a spreadsheet with a monthly inventory of bunks, including density, tons of feed and other information, and how that compares to previous year.

Foster Bros. now stores its feed in open bays. Using data from both spreadsheets gave Foster a good idea of how much waste and shrinkage cost the dairy, and whether it’s worth buying a covered bin. Yes, Foster concluded from the data. “It’s another case where writing things down comes to fruition.”

Foster’s collection of spreadsheets includes:

an income over feed cost spreadsheet that tracks feed costs based on feed value, feed costs cwt. and per lb. of component, milk price and income over feed costs.

a fuel log listing each piece of equipment by number, gallons of fuel used, number of hours on the vehicle, and which enterprise has used it.

a spreadsheet for calf feeding, showing how changes in feed affect growth weight. “Our goal is to freshen by 22 months, or 80% of mature body weight,” Foster said. “As long as the feed program gets it there, we’re doing OK.”

To track everything pertaining to cows, from milk production to calving weights, Foster uses PCDart herd management software, also immensely useful in translating data into Excel to make management decisions. For instance, by tracking the cost per cow of feed ingredients and components, Foster can tell if the dairy is getting its money’s worth.

“It tells me if additives work and how much I’m paying to get each pound of protein and butterfat,” Foster said. “Is the digestibility too low? Fiber too high? What do I need to add for ingredients to make up for it?”

It takes Foster roughly 20 hours a month to do the recordkeeping and accounting. For now, he enters the numbers himself. “I understand the numbers a lot better if I input them myself, although some day I will probably get someone else to do that.”

Manipulating the raw data is one thing; getting the data is another. Foster provides paper charts for all tasks, making it easy for employees to fill in when, for example, they treat a calf.

“The rule at Foster Bros. Dairy is: If you do anything to a cow, write it down. I’ll decide later on whether to use it or not,” he said. It’s a tradeoff, though. “How much do you want to force guys to record stuff, or do you want to get the crop in?”

Once the data is in the computer, however, leave it to Foster to make the most of it.


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