Accurate Gross Margins with Used for Feed and Seed tracking

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Accurate Gross Margins with Used for Feed and Seed tracking
By Jimmy Forward

Farmers around the globe are regularly required to make important decisions that will affect the business’s bottom line. One of the recurring decisions is “Where am I best to use my harvested crops?” Do we sell it all? Do we use it for feeding livestock or seeding future crops? Or a combination of these? It’s a matter of working out where we can make the most out of the harvested crop for the benefit of the business - in turn, this leads to answering larger questions like “What’s the best use of available land to maximise farm profitability?” The opportunity cost of putting production towards one use over another needs to be constantly assessed, and planned usage may need to change over the course of a season.

A great example of this was the 2019 droughts that affected eastern Australia. Pasture dried up across New South Wales and Southern Queensland, so livestock producers had to turn to purchased feed. The ensuing increase in demand sent hay prices skyrocketing, and astute farmers in South and West Australia redirected hay production away from producing fodder for their own livestock. Instead, they trucked it hundreds or even thousands of kilometres across the country to fulfil the demand. In global markets, the opportunity for profit must be constantly re-assessed as factors change.

Typically, cash focused systems have accounted for the quantity of crops used for feed or seed, but rarely consider the cost/income contribution between livestock and cropping. Our own previous iterations of crop tracking functionality also missed this vital component. We recognised there was a gap in the ability to accurately record this, and we have solved it with the release of our Used for Feed and Seed functionality. Built into our refreshed cropping experience, the Used for Feed and Seed function allows for the intent of the usage to be recorded, and creates a system of Figured-only transactions to ensure costs and income are appropriately placed.

UFFUFS

For example, at the start of the season a farmer may decide they need to set aside 100 tonnes of hay to feed cattle. This intended use can be recorded on the harvest, a cost per unit is then set on each intended usage so external sales can be at a different price than internal use. This allows the average price per unit produced to be generated, producing accurate profit and balance sheet forecasts.

The intended use can then be entered as forecast ‘Used for Feed’ transactions, to allocate the income to the appropriate crop season and livestock tracker. This produces accurate gross margin calculations across all enterprises on the farm.

UFFUFS1

Used for Feed and Seed transactions are available on both actual and forecast basis, and generate transactions that only exist in Figured. This allows Figured to give you an accurate breakdown of crop profitability, while keeping Xero tidy from now unnecessary internal entries. Those farmers or advisers seeking to have Xero reflect those entries still have the option of recording journals in Xero and adding quantities of crop production to them via the Allocator.

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To find out more about how the Used for Feed and Seed function works, and how it can make gross margin calculations easier, please check out the help centre articles in Figured's Help Centre.