New dairy industry Standard Chart of Accounts available
Dairy farmers will now be able to extract greater value from the bookkeeping/accounting process and make better informed business decisions with the launch of a new Standard Chart of Accounts for the dairy industry.
Developed by Dairy Australia in response to requests from farmers and service providers, the Standard Chart of Accounts will also drive consistency in how the dairy industry reports and discusses farm business performance.
Dairy Australia’s Farm Business Capability Program Manager, Neil Lane, said the Standard Chart of Accounts enables dairy farmers to manage the flow of financial information through their business and establish an efficient system for paying bills and complying with Australian tax regulations.
By following the Standard Chart of Accounts concept farmers are more able to extract ‘management’ information about their farm business without compromising the bookkeeping and tax compliance requirements of the business, he said.
When coupled with the following key physical data the farm manager has the key information required to construct management accounts:
Milk sales – litres, kg butterfat, kg protein
Livestock sales - no. of head sold or purchased
Concentrates – tonnes purchased
Fertiliser – tonnes purchased and nutrient composition
“So with correctly categorized expenditure and key physical information farmers and their advisors are able to move seamlessly into constructing monthly cashflow, completing a DairyBase analysis or show the impact on a changing milk or purchased feed price,” Mr Lane said.
“The management accounts enable farmers to complete end of year and comparative analysis on their business by ensuring a consistent approach to the allocation of financial information and financial terminology used within the dairy industry. It will also enable conversion to a regular cashflow and could be utilised for budgeting within businesses,” he said.
The new Standard Chart of Accounts is based on previous work including the Financial Records Guide for Dairy Farms from Murray Dairy and the Dairy Farm Monitor Project (DFMP) from the Department of Economic Development, Jobs, Transport and Resources (DEDJTR). The launch of DairyBase, the industry’s new online farm business management tool, also prompted a review of farm business management terminology.
Mr Lane said the Standard Chart of Accounts had not been established as a rigid tool to prescribe the exact setup of farm accounts on all dairy farms, but a guide for farmers to keep financial records. If used correctly, it will give consistency in record keeping, he said.
As well as providing farmers with data to make informed financial and farm management decisions, the Standard Chart of Accounts will also allow farmers to effectively compare their business with others.
“The use of comparative analysis by some sectors of the dairy industry is more accurate if each business doing the comparisons have put their income and expenses in the same category in their financial recording system,” Mr Lane said.
To find the new chart of new accounts go to http://www.dairybase.com.au/using-dairybase/chart-of-accounts