ACCOUNTING FOR PROFITS BY DAVID BEKEDAM WHERE IS THE TRAIN HEADED? Here we go again! If you didn’t lock up your milk before the end of last year, you’re probably staring $14 to $15 milk square in the eyes. While milk prices remain extremely volatile, I wouldn’t com- pletely count out the possibility of the price rebounding; however, with over supply, con- sistently increasing production, and strong inventory build-up of butter and cheese, fl at to lower prices in the foreseeable future may “These days, many banks are be a reality. considering financial sophisti- Talk is equity burn, once again Due to this volatility, talk amongst bank- cation of management as part ers regarding equity burn rates is becoming common once again. The banks are looking of their assessment of risk, which impacts your interest rate.” FYI You want more than a milk check from your Cooperative. You want more services that help increase profit margins. Representation that tells Capitol Hill what farmers need. Innovation that takes your milk from farm to table. That’s More Cooperative. www.dfamilk.com 16 April 2012 WESTERNDAIRYBUSINESS I David Bekedam, CPA, senior manager, Frazer, LLP, Visalia, Calif. Contact him by e-mail at: dbekedam@ frazerllp.com or call, 559-732-4135 Ext. 120. at the ability of individual dairy operations to survive another downturn. The ques- tion in a nutshell, “does the operation have enough cash and available credit to make it through a downturn before hitting certain loan-to-value (LTV) limits?” Dairymen should be asking themselves how long it will take before banks are unwilling to extend any further credit. Time to gain perspective With breakevens well above current milk prices for many dairymen, it’s time to gain a sense of perspective on the vi- ability of your business in the year ahead. Many producers have $65 silage and $280 hay sitting in inventory being fed right now. We’ve seen the effects for many in the 4th quarter of 2011 fi nancial state- ments and are not anticipating 1st quarter 2012 numbers to be any better. If you aren’t already preparing forward-looking budgets or cash fl ow projections, don’t wait any longer. Preparing cash fl ow projections will not only help you manage your cash, it will also give you a glimpse into the future. Cash fl ow projections should take into account several historical and future items of income and expense. For most operat- Please turn to page19 www.dairybusiness.com