Preparing monthly financial statements is typically done so you can get the proper financing for your merchandising activities; but there are also good reasons for doing them other than for your banker’s sake. Monthly financial statements can be extremely helpful in analyzing your merchandising outcomes and steering key business decisions . . . sort of like having a Merchandising Scorecard.
Monthly financial statements can give you key insights into:
Where you’re making your money,
What crops are most profitable to handle,
Your margins per bushel of space,
Whether direct-ship bushels are enhancing or draining your merchandising margins,
And so much more!
Having such insights into your business operations are essential to making important decisions like . . . deciding where to focus your resources . . . what areas of your business to grow . . . and which ones to let go.
Getting Scorecard Ready
If you’re not viewing and using your financial statements as your Merchandising Scorecard perhaps a few tweaks to your monthly accounting procedures are in order. Key points to getting your financial statements scorecard ready:
Do them in-house – a knowledgeable accounting team equipped with good grain accounting software is the secret sauce. Well worth the investment.
Do them monthly – once a year just doesn’t cut it if you want to know what’s really going on.
Include proper mark-to-market valuations – simply put, financial statements that don’t include open positions that are marked-to-market aren’t worth the paper they’re printed on.
Structure the P & L Statement into profit centers – it will open your eyes to how your money is really made and maybe even whether that pet project is worth keeping.
Segregate Income by commodity – you can’t fix what you don’t know is broken. In the case of merchandising, that means being able to define which bushels are worth owning and which are not.
Specialized World of Grain Accounting
As you work toward setting up your monthly accounting routines or getting your financials in a form helpful to your merchandising analysis, it’s important to keep in mind that grain accounting is a specialized field that requires specialized training. You won’t likely have learned the specifics of how to do mark-to-market as it applies to valuing grain positions in your accounting class. Nor would you likely have been exposed to how merchandising margins are generated through basis trading. Yet, both are key to achieving accurate and scorecard worthy financial statements.
Though your accounting background may not have prepared you for the grain world, it doesn’t mean you have to go it alone. There are CPA’s and CTA’s who understand the specialized world of grain accounting and can help. Seek them out.
And for the development of your own in-house team there’s the White Commercial Mark-to-Market Accounting Course. Yes, that’s us, the author of this blog. We are a futures broker for commercial grain-based businesses. Our focus is on assisting our customers in carrying out their basis trading activities, part of which includes advising on proper accounting procedures.
The Mark-to-Market Accounting Course is a comprehensive program that provides instruction regarding the best practices of mark-to-market grain accounting, as well as financial statement preparation, communication, and analysis. That’s right – we’ll show you how to turn your financial statements into your personal Merchandising Scorecard!