Cattle U speaker breaks down ranch accounting and record keeping

If there ever was a year to buckle down on budgeting and learn how to improve ranch record keeping, it would be 2020. Logan Hoffman, who works in beef Extension at Colorado State University, spoke about this topic at High Plains Journal’s Cattle U virtual event Sept. 8 to 11.

During his presentation, Hoffman outlined three areas to master in order to better understand their ranch operations and they are profit centers, cost centers and support centers.

Hoffman also delved into common misconceptions and tips on how to calculate an accurate and consistent unit cost of production number and how to utilize that final number to be more profitable.

“The end goal of accounting is how do I make more money on my operation,” he said. “If you’re working in any type of production-based business, as farmers and ranchers are, you have to make decisions on what types of products to make. Using accurate production and accounting practices will help you understand the margins. I work with producers all over Colorado and that’s what we help them do, but I can tell you that most producers don’t do this very effectively. In essence, they’re running a business without understanding if they are making money or not.”

Hoffman said many farming and ranching operations can get away with not understanding margins because they have equity built up. Banks will loan them money because of their collateral, but no farm can last forever with this accounting strategy, he warns. The COVID-19 pandemic is forcing producers to know their margins just to stay in business during a hard-hitting year.

“A producer needs to understand what areas they can cut costs and what their labor, fuel and budget should cost,” Hoffman said. “You need to understand your enterprise mix and that you are in the right enterprises for your situation. If you are making your own hay, but don’t understand what it costs to make one hay bale, it’s definitely time to understand.”

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Lacey Newlin can be reached at 620-227-1871 or [email protected].