Saturday, March 19, 2011

The World According to GAAP

Once upon a midnight dreary, fingers cramped and vision bleary,
System manuals piled high and wasted paper on the floor 
Longing for the warmth of bedsheets, Still I sat there, doing spreadsheets*;

My friend and colleague, Robert, with whom I have done a number of business plans for clients as varied as oyster farmers, welders, plumbers and roofers, decided it was high time I learned to do the pro-forma financial statements myself.  I had always depended on him since he has years more experience AND a Commerce degree.  I've used spreadsheets for years and done financial statements too but nothing very formal and all agriculture related.  The production models were fairly basic and the financial spreadsheets that I had done were mainly simple partial budget enterprise analysis rather than whole farm and certainly never followed anything close to GAAP (Generally Accepted Accounting Principles). 

So for the past week, I have been wrestling with understanding things like Cost of Goods Sold, Statement of Change in Financial Position (aka Cash Flow) and having Balance Sheets that actually balance.  With all the right information called by the right names and subtotaled under the right category names.  It has been quite interesting for me as I have known for some time that I needed to learn to do proper financial statements. 

I still have the rest of the Business Plan to finish off but that is the easy stuff compared with the financials. And I am learning more about Excel at the same time.


*The Computer Nevermore

5 comments:

  1. Love the illustration. That's a hoot!
    Now, where can I get one? :)

    What's with GAAP? The real moneymakers these days are into SS&I*, based on the timeless Three Walnut Shells and a Pea accounting system.

    *Slick, Slippery & Inscrutable.

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  2. SW God help him if he ever gets to hedge funds or derivatives.

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  3. Demur: lots of farmers are into hedging these days, on the commodity market. As for derivatives, isn't that what you get when you turn grain into pork?

    Good poetry, BF; you wisely left out the "Nevermore!" Maybe it's be "always more."

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  4. The source of the poem is linked at the bottom. Large ag operations hedge stuff all the time on the commodity exchanges as a way of securing at least a portion of either their inputs or their sales. or both.
    Hedging is NOT like hedge funds. I know nothing about them or about derivatives except that they should likely be illegal.

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  5. Saw in High Country News where Montana sent an "instant ranch" to southwest Russia. Over 1400 cattle and the cowboys to take care of them.

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