How JA Ranch Keeps Records
new building. That’s where business interruption in- surance comes into play.” According to III, “Business interruption insurance
compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fi re. Business interruption insurance covers the revenue you would have earned, based on your fi nancial records (there is that records thing again), had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt. “Make sure the policy limits are suffi cient to cover
your company for more than a few days. After a ma- jor disaster, it can take more time to get the business back on track than many people anticipate. There is generally a 48-hour waiting period before business interruption coverage kicks in. “The price of the policy is related to the risk of a fi re
or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fi re. Also, a real estate agency can more easily operate out of another location.” The III also references extra expense insurance, say-
ing, “Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually, extra expenses will be paid if they help to decrease business interruption costs. In some instances, extra expense insurance alone may provide suffi cient coverage, with- out the purchase of business interruption insurance. Once you have considered the risks to your well-
being and to your ranch buildings and infrastructure, consider what would happen if a key employee, or your partner, was taken out of the ranch operation due to disability or fatal accident. Business continuation insurance is something to
consider. According to
Investopia.com, business continuation
insurance is “life insurance that a company or fi rm purchases to provide the funds necessary to continue business and cover the losses incurred in the event of the untimely death or disablement of someone criti-
Because it’s the beginning of the year, we couldn’t resist a short item on get ting organized. Here is a brief look at how JA Ranch, Amarillo, maintains records. This system is used for their stocker and cow-calf operations.
Dale Smith, part of the JA Ranch management team, says they use a proprietary accounting system that keeps the “general ledger and man- agement books on a lot-by-lot basis with a single entry system, somewhat like a feedyard.
“This produces inventory by pasture as well as profit center and cash accounting books. A lot represents a distinct group of cat tle and related information including the purchase price, direct expenses accountable to that lot, feed, medicine, hay, etc.
“Overhead costs such as salaries, truck and equipment expense, windmill, and other general ranch expenses are allocated to all cat tle. The system makes sure all expenses are captured by a profit center or lot. When the cat tle are shipped off the ranch and that lot is closed out, a closeout shows profitability, average daily gains, cost per pound of gain and average feed consumption,” Smith explains.
“Expenses are broken down further by direct ex- penses, overhead, interest, feed medicine, etc., per head and per pound.”
Smith says this information is added to the ranch database, which allows them to review decades of information. “This helps us make informed de- cisions over the long term. When we buy cat tle, because we’ve kept track of past performance and expenses, we have very accurate breakevens and know what our risk is.”
tscra.org
January 2016 The Cattleman 71
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