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Using Management Accounting
to Link Financial Performance Analysis and Strategic Thinking
By R. L.
ãDickä Wittman
Wittman Consulting Services
Few farmers understand cost
structures and the strategic decisions that differentiate successful farms
from those struggling financially. Traditional Enterprise Analysis hasnât
provided answers growers need to determine what decisions are contributing
to success or failure. Ratio analysis is not well understood and seldom
connected to goal setting and decision-making. This presentation is a
primer course that showcases new initiatives in the farm management arena to
implement professional managerial accounting systems. It also illustrates
the often overlooked linkage between financial analysis and strategic
decision making.
Learning Objectives
Participants attending this
seminar will:
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Become familiar with new
initiatives and guidelines being developed by the Farm Financial Standards
Council to implement professional managerial accounting systems in farm
business operations
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Gain an improved
understanding of the linkage between financial analysis and strategic
decision making
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Develop strategies for
guiding and motivating clients to increase the use of ratio analysis and
the Dupont Model to evaluate whole farm business performance; and to
assess the impact of alternative strategic shifts under consideration to
improve operational efficiency, capital asset management, and use of debt
leverage
-
Become familiar with a
broad range of technical issues and concepts that must be understood
before managerial accounting can be successfully implemented
-
Gain hands-on access to
training and implementation strategies necessary to lead clients through
the process of adopting managerial accounting practices
Timed Outline ö 15 Minute Increments
A timed outline
approximation for the technical topics and issues that can be covered in a
90 minute presentation is as follows. This outline can be condensed or
expanded with material and case study work to vary the presentation length
from 45 minutes (minimum) to a half or all day seminar.
Segment I - 15 minutes
- Understanding the
evolution from enterprise analysis to managerial accounting ö why and how
it is taking place
- Building a foundation
for MA and performance measurement ö rekindling client interest and
motivation to use ratio analysis as a tool to evaluate whole farm business
performance; identifying the four primary drivers of financial performance
- Using the Dupont Model
to assess the impact of performance in operational efficiency, capital
asset management, and use of debt leverage
Segment II ö 15 minutes
- Five steps to Strategic
Management ö Why this relates to Managerial Accounting
- Using the Dupont Model
to simulate the impact on bottom line performance from specific strategic
shifts under consideration
- Differentiating purposes
and methodology associated with Accounting versus Economic/Opportunity
Analysis
Segment III ö 15 minutes
- Defining the Core
Concepts underpinning Managerial Accounting Practices
- Identifying management
intent; manageable segments (cost and profit centers); and developing
standardized profit/cost center report formats
- A walk through of MA
using a Case Study developed by FFSC as a training tool ö
Spread-N-Grow Case Study
Segment IV ö 15 minutes
- Handling unusual
transactions ö how do you assure the initial transaction entry provides
the ability to have integrity in both external financial reports and
internal managerial accounting reports?
- Agreeing on standard
definitions: Direct vs. indirect costs; variable vs. fixed costs
- Proper methodology for
dealing with internal transfer pricing situations
Segment V ö 15 minutes
- Alternatives for
allocating indirect costs (i.e. overhead); defining Capture Periods
- Integrating financial
and physical quantities ($, bu, acres, employees)
- Highlights of several
technical issues complicating managerial accounting systems: inventory
valuations; handling equipment gains/losses; use of a ãland cost centerä;
tax versus economic (book) depreciation (which number is relevant for
business performance analysis?)
Segment VI ö 15 minutes
- Strategies used and
results from experiences teaching Growers, Practitioners, Consultants;
lessons and feedback from grower exposures to Managerial Accounting
training
- Options for accessing
resources (grants, personnel, sponsoring organizations; FFSC websites,
guidelines, case studies) to teach and implement this concept in
agri-business management
- Summary and Questions
Participants attending
this session will come away with: (1) an appreciation for the benefits of
building a professional managerial accounting approach in the business, and
(2) a vision of the training and implementation strategies necessary to
fully lead clients through the process of adopting managerial accounting.
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