Crop Management and Crop Accounting
Allocation of Accounts Payable Items and Costs for Crop Management
Produce Magic Software Crop Management and Crop Accounting Programs provide very simple and powerful ways to allocate Accounts Payable items and costs such as overhead to any number of separate Crop Inventory Lots.
We have a great deal of experience with the allocation of payables and other costs to specific salespeople, specific Sales Orders, specific Purchase Orders and specific Inventory Lots.
To get the true Profit and Loss for each crop, EVERY PENNY spent by a growing operation should be allocated to product grown on that operation, whether those costs are direct Accounts Payable items, or some type of overhead cost. The company should be able to total the costs allocated to each of the Crop Inventory Lots and come up with the EXACT total costs for the entire company! Produce Magic Software gives our customers the ability to do that painlessly. Some things might be allocated to ALL Crop Inventory Lots, and some things might be allocated to only specific Crop Inventory Lots or groups of Crop Inventory Lots. For each Crop Inventory Lot, the expected number of pounds should be entered to use for certain allocation purposes.
A logical way to allocate some of the costs and Accounts Payables is by each Crop Inventory Lot’s percentage of the total pounds for the growing operation. A screen is provided to display the expected number of pounds for each Crop Inventory Lot and the overall total number of pounds for all of the Crop Inventory Lots for that Grower Site.
It is often desirable to give some Crop Inventory Lots a larger share of the general overhead costs, because those crops may use a higher percentage of the overhead cost. Each of the Crop Inventory Lots have a field titled DECIMAL TO USE FOR ALLOCATIONS. That number is the default decimal split of the total Grower Site general overhead expenses. Accounts Payables and other costs can be allocated automatically to the selected group of Crop Inventory Lots, based on each of those Crop Inventory Lot’s percentage of weight or percentage of the decimal split, for the selected Crop Inventory Lots.
The DECIMAL TO USE FOR ALLOCATIONS numbers could be changed at any time during the year. Automatic allocations use the current decimal numbers at the time of the allocation, so changing the decimal numbers will affect future allocations but not prior allocations. Allocations to multiple Crop Inventory Lots are entered in an allocation transaction. Each allocation transaction is automatically assigned a transaction number that links it to its separate allocations.
The Accounts Payable Vendor, description, quantity, cost and General Ledger Account Number are entered into the allocation transaction in a screen similar to the Accounts Payable screen. Other Payable information, such as Vendor Invoice number, etc. could be entered at that time if known, or that information can be entered later. Then the Crop Inventory Lots to allocate the cost to are selected and the decimal split for each allocation is entered. That information and the actual amount that was allocated is stored in a separate data file for each allocation transaction.
There is an option to automatically add all Crop Inventory Lots for that growing site to the allocation transaction, using either the DECIMAL TO USE FOR ALLOCATIONS or the weight percentage. Some of the Crop Inventory Lots could be removed or the allocation decimals changed before allocation, if desired.
The total decimal to allocate must be 1.00 before it can be allocated. Pressing our “hot key” on any of the allocation decimal fields will change that allocation line to be the remaining decimal to make the total 1.00 (provided the total of the other lines is less than 1.00).
Allocation of Overhead Type Costs
Some of the costs that are allocated to Crop Inventory Lots, through these Accounts Payable items, are not actually Accounts Payable items, but are various overhead costs that have already been paid and expensed to a General Ledger Account Number expense account. For these allocations, the General Ledger Account Number that the transaction was previously expensed to, needs to be entered so the previous expense can be backed out at period end.
A Special Company vendor code is used and then the two characters for the Site is used for allocation transactions that have been paid and expensed previously. Since the vendor code starts differently, it will be at the end of the list and not with regular vendors. Before this Site vendor can be used in an Allocation transaction, the Previously Paid and Expensed General Ledger Account Number must be entered in that field in the allocation record. That is needed so a period end report can be printed and subtotaled on the Previously Paid and Expensed General Ledger Account Number, allowing those expenses to be backed out in the period end adjustments. These expenses need to be backed out in the period end adjustments, because the allocation transactions create “Accounts Payable items” that “expense” those costs to different General Ledger Account Numbers.
The example of that special Site vendor “Accounts Payable items” are not transferred to Accounts Payable for check printing like regular Accounts Payable items, because they have been paid and expensed previously. When approved Accounts Payable items are transferred to the Accounts Payable package for check writing, the status of these Site vendor Accounts Payable items are changed to a ‘transferred’ code, but they are not transferred, because a check does not need to be printed for them.
At period end, two reports are printed for this vendor “Accounts Payable items” for the period. The first report prints the detail and subtotal for each of the General Ledger Account Numbers that was used in this vendor allocations. Keep in mind that one allocation transaction could create dozens or even hundreds of separate “Account Payable items” that are allocated to different Crop Inventory Lots and could be allocated to different General Ledger Account Numbers.
The second report prints the detail and subtotal for each of the Previously Paid and Expensed General Ledger Account Numbers used in allocation transactions for that period. These two reports can be printed with the detail or with totals only for each of the General Ledger Account Numbers. For posting to the General Ledger, the totals only report would be printed to make the journal entries simple and quick. In many companies, there might only be a dozen General Ledger entries to make for these transactions, which can all be made in a single, multi-part journal entry.
If these entries were extensive, an automatic interface could easily be written to any of the General Ledger packages that we support, which would send the total for each account to the General Ledger in a balanced journal entry. These journal entries, whether manually entered or automatically created through an interface, are backed up by the printed report. Negative “Costs” may need to be allocated to allow for refunds or cost reductions. At the START of each period, the projected total for each of the various growing overhead costs could be allocated to all or selected groups of the Crop Inventory Lots.
The company may have groups of overhead costs that only apply to certain crops. For instance, special equipment may have been leased for icing Broccoli and that equipment is used only for Broccoli. The cost of that lease should only be allocated to the Broccoli crops if it only benefits those crops. At the end of each period when the actual overhead costs are known, the difference between what was allocated at the start of the month and the actual cost could be allocated to the Crop Inventory Lots in the desired manner. This makes it so all ACTUAL costs are allocated to the Crop Inventory Lots. The Total costs for the company, should be the exact same as the total costs allocated to Crop Inventory Lots. Since the Crop Inventory Lots will tie directly to the Inventory Lots used for repacking and Sales Orders, any changes in the costs will be updated to all Purchase Orders, Repacks and all Sales Lines using the product, even if the changes are many months after the product was sold. Changes in product cost are updated to all of the sales for that product or to any of its repacked generations, no matter if those sales orders are finalized or not. The sales price and invoice are not affected, but the Profit and Loss is. Most companies want any changes in cost to update the Sales Order line items and change the cost and profit/loss on them. If a Company did not want the cost to be updated to sales orders after the fact, that could be changed in the program to update to the sales lines only under certain circumstances. As you can see, the Crop Management and Crop Accounting module complements the Produce Magic Software package very nicely. It allows companies involved in the entire process of growing, packing and shipping to accurately track all of their costs to show a true profit and loss. It is also a wonderful tool for companies who sell bulk product through contract or consignment to track the production and costs associated in producing that bulk product.
Crop Management Actions Programs
In the Actions program of Produce Magic Software, the user selects the Crop Inventory Lot from the list for that Site, the action code, the main employee code responsible for that action, the number of employees, the Date, Time, etc.
Each of those records could link to a list of the employees for that action (that could be used for some and not for others). Employee codes would have a default crew assigned.
So a Crew could be selected that would automatically bring in all the employee codes for that crew, then some of those could be deleted and others could be added for that particular task.
The employee default hourly wage and their default for each type of piecework (or any job costing) would link to those records for various cost accounting purposes that you might want to have customized. Those action records could also be linked to Project and Cost Center codes in our Time Clock programs.
Each company would create a database file of the Actions they wanted to use. A default list could be used and modified for that particular operation. The Actions could include: plowing, sowing, hoeing, weeding, changing sprinkler pipes, watering sets for pivots or hand lines with estimated inches or water applied, rainfall, applying chemicals, applying fertilizer, etc. Each Action has an Action Type, which is automatically inserted into each Action record when the Action for that record is selected.
The Action Type is ten characters; however, at this time only three characters are used in programs and on the screens. Action Types include: A/P = Accounts Payable, WTR= Water Application or Rain, CHM= Chemical Application, FRT = Fertilizer Application, LTC = Labor using the Time Clock for the Action’s Project Code, LGN = General Labor, LFL = Field Labor, Etc.
The first five Action Types are fixed types that have special programs and tracking attached. Any number of additional user defined Action Types can be created by each company. Some of those would be tied to custom programs that the company will have us write to track particular things that are specific for their use. For water applications, the estimated number of inches applied would be input and tracked, as an example.
The estimated number of inches of Rain for each Crop Inventory Lots would be input as an Action with the date and time the rain started and ended. Inputting water applied and rainfall would allow reports on the total number of inches of water applied or from rain for each period. A rain Action record could be created for the entire growing operation and create a Rain Action code for all selected Crop Inventory Lots.
Then the user could manually edit any of those records in case some area had a different amount of rainfall. When actions are edited, the existing action record is copied first, so an audit trail of all changes is permanently maintained. The user code, date, and time of the change is inserted into each record. The action codes for watering and rain have an action type of WTR, so the program could combine those special action codes into Water Application Reports.
A data file is also provided to input the temperature and humidity for each date so that information can be printed on the water reports to give general guidelines as to water needed. Reports like these can be customized for any particular need.
Each action could also link to any number of Accounts Payable items for that action, which would link directly to the Crop Inventory Lot selected in that Action record. When the action code is Type CHM, application of chemicals or FRT, application of fertilizer, the Action record would be linked to special tracking files for that type and will require input of registration numbers, certification numbers of the applying person, and any other information that needs to be tracked.
The Action record could be created without inputting all of the required registration and certification information, but the Action Status could not be changed to ‘complete’ until all required information was entered. Actions remain in the current Actions list until they are marked as completed. All required fields for the particular Action Type must be entered before an Action can be marked as completed.
Crop Management Overview
Since many produce companies do not need Crop Management and Crop Accounting, our Crop Management Module is sold separately from the Produce Magic Software package.
Our definition of Grower Accounting is TOTALLY different than our definition of Crop Management and Crop Accounting. We define Grower Accounting as the tracking and reporting of consignment sales to vendors/growers. The majority of our customers, even companies who were previously brokers only, do various types of consignment sales that require very accurate tracking of sales for that grower and the ability to report to the grower in specific ways that fulfill the terms of the contract with that grower.
Grower Accounting requires Inventory Lot tracking. Brokers and other Produce Companies who normally do not track Inventory Lots, need the ability to track Inventory Lots when they do consignment sales or consignment loads. Many produce companies are afraid of Inventory Lot tracking because they feel it is too complicated for what they need. Using Inventory Lots to track consignment sales is very simple and is MUCH easier than tracking things manually.
Our definition of Crop Management and Crop Accounting is the tracking and accounting that is done by growing organizations, before the product is sold or reaches the warehouse for repacking and sale.
In many cases, it would be very helpful for a Growing operation that does not sell their own product to use our Crop Management and Crop Accounting package, then do their consignment sales through a company that uses Produce Magic Software. That way, the Crop Inventory Lots could be linked to the Sales Inventory Lots and everything would tie together. We strongly encourage our customers to have their consignment growers use Produce Magic Software’s Crop Management and Crop Accounting, so the Grower’s Original Crop Inventory Lots tie to the Inventory tracking and Inventory Lot Summary.
That detailed information would be very helpful to the consignment growers. We can do custom programming to provide whatever special functionality is needed. Each growing company can be set up as a separate Site in Produce Magic Software.
A “Site” in Produce Magic Software, normally has a separate General Ledger. There could be any number of totally separate growing operations set up in this manner. Our Sales Order numbers and Purchase Order numbers are always a two part number that contains the Site at the start, then the number. Therefore, every Sales Order number and Purchase Order number automatically identifies the Site as it has the first two characters of that “number”.
Each of those Sites could have any number of Departments / Warehouses for tracking purposes and could have any number of growers and any number of blocks. The main growing company for our customers would normally be set up as a separate Site to keep it more separate from other consignment growers. However, there could be any number of growers for each Site and Produce Magic Software still tracks things totally separately.
Each Site – Department / Warehouse combination can be set up as Inventory Tracking or non-inventory tracking. This combination can also define the Inventory Product Site to use. This any number of Site – Department / Warehouse combinations share the same Inventory Product Site. The same Inventory Product Site can be shared by totally separate Sites with totally separate General Ledgers.
This allows Inventory Lots for each of those different Site – Department / Warehouse combinations to appear in the same inventory list and be used in the same Sales Orders. Different Site – Department / Warehouse combinations could also have their own Inventory Product Site, which would require the Sales Order line items to use that Inventory Product Site as the Department code so that inventory list could be accessed.
That would separate product into different “Departments”, even though it may be sold through the same company. There are extensive reporting capabilities on the Department / Warehouse field in Sales Orders, so using a different Department / Warehouse code for the Inventory Product Site provides good separated reporting for that Department / Warehouse code.
Each separate crop and growing block/field would have a separate “Purchase Order”. This is not a traditional “Purchase Order”, but it is a Purchase Order ‘brought in’ for the Sales Site that will use the inventory once it is ready to sell. Making the grower crop a “Purchase Order” creates an Inventory Lot for the bulk product and allows us to use the same VERY POWERFUL tracking and Accounts Payable programs that are used in Purchase Orders and Sales Orders. That saves ten thousand hours of programming and gives us very high quality programs for most of the tracking and cost accounting. This also gives the Crop Management / Crop Accounting the same “feel” as our other programs.
Setting up crops as a Purchase Order in this manner works VERY WELL and makes it simple to track all costs and all events that occur with the crop. The Crop Inventory Lots are created immediately but it is below the status that can be used in Sales Orders or included in Inventory totals. So for the sales site, those Crop Inventory Lots do not show up in the normal Inventory Lot programs. Defaults could be set up, so authorized users, who clicked on a certain default field, could view them as needed.
Once the product is ready to sell, the entire Inventory Lot could be changed to a ‘sellable’ status, or portions of it could be transferred to sellable Inventory Lots that link back to the Original Lot (the same as repacked Inventory Lots). In many cases, product coming from the bulk Crop Inventory Lots is repacked into different product codes. With Produce Magic Software, repacked Inventory Lots link back to the Original Lot for tracking and accounting purposes. Each Inventory Lot and line item using those lots, stores fields for the current Inventory Lot number, AND for the original Inventory Lot number. The vendor for the Purchase Order is the Grower Code for that crop. The Received From code for the Purchase Order would be the Block or Field code. Each of these Crop “Purchase Orders” would have one or more line items with a bulk product code and a Crop Inventory Lot would be attached to each Purchase Order line item. There could be multiple product lines under the same Crop Purchase Order if more than one crop were being grown on that grower block number (field), but normally there would be only one line item and one Crop Inventory Lot to avoid confusion. The “Crop Inventory Lot” would be used to link all the costs, actions and notes together. The “Crop Inventory Lot” is the lowest common denominator for a separate field and crop. In some cases, one “field” might be split into a number of separate logical fields, even rows, because the growing characteristics in some areas (or rows) of the field are different than other areas (or rows) of the field. Many growers currently call this lowest common denominator a Grower Block or a Field. The same term could be used for our “Crop Inventory Lot” if desired. These Crop Inventory Lots are made available to the Sales Site when they are ready to sell. This allows for a continuous tracking flow from the start of the growing operation, through the packaging process and the warehouse, ending with delivery to the customer. Most growers do not currently have that capability. Many growers have good tracking of the information until it gets to the warehouse, but the tracking is usually lacking after that point. Many companies track inventory manually (if at all) once it reaches the warehouse. And, when product is repacked, very few produce companies have the ability to link those new Inventory Lots for the new product codes back to the original Inventory Lot for tracking and accounting purposes. This is all done automatically with Produce Magic Software. Produce Magic Software also provides the ability to allocate costs to any number of different Crop Inventory Lots. Each Crop Inventory Lot could have a unique G/L Account extension code (cost center), which could be automatically inserted into the specified position of the regular Accounts Payable G/L number for the service or action. This provides very detailed cost accounting with the summary for G/L account and cost center going to the General Ledger. Some companies like that level of detail in their General Ledger and others do not. The detail information is available from reports in Produce Magic Software, so many companies keep their General Ledgers simple and get detail reports from Produce Magic Software.