AgKnowledge – “Cultivating Business Growth”
These five examples are actual circumstances in which AgKnowledge’s financial management and analysis discovered errors and was able to provide cost savings to the customer. Of course, these results are not guaranteed, but are certainly possible if errors or discrepancies are present.
Input pricing discrepancy
While analyzing a client’s seed, fertilizer, and chemicals costs, the AgKnowledge analyst discovered price discrepancies among the same product from the same vendor. A grower farming approximately 3,500 acres will spend $500,000 to $800,000 on crop inputs. In this particular case, a product was priced at one point for $50 per gallon and at other times $52-$53 per gallon. The grower notified the vendor’s sales representative, and was refunded approximately $10,000 in mischarged invoices, which was approximately the client’s annual AgKnowledge fee.
Seed Analysis
A client purchased a new planter that was calibrated to plant 48,000 seed per acre. There was no doubt that this was the amount of seed that was being planted. When the AgKnowledge analyst totaled the amount of seed that was sold to the grower and calculated the amount that was needed to plant the cotton acres in the operation, a discrepancy was discovered. The amount of seed that was billed to the client would have planted 700 additional acres. Including seed cost and seed technology fees, the overcharge amount was $40,000, which equaled three years of AgKnowledge fees for this grower.
Fuel Usage
In farming, fuel consumption is a major expense. This comes in the form of diesel used in the field, diesel consumed for irrigation, and propane used for grain bins. While reviewing and tracking these expenses, the AgKnowledge analyst discovered that the fuel company billed the grower for a propane tank that was attached to a grain bin in which no grain was stored…three separate times! Catching this “billing mistake” by the vendor saved the client $3,000, which was a third of the annual fee the customer paid AgKnowledge.
Banking Mistake
AgKnowledge conducts monthly analysis of our client’s banks statements. A 4,500 acre operation can have as much as $2,500,000 of transactions flowing through the bank account. In the monthly analysis a debit was discovered that could not be coded. The AgKnowledge analyst discovered that the bank put the wrong account number on the debit. The amount was $7,800, which was approximately 45% of the client’s annual fee.
Crop Analysis
An AgKnowledge client farmed a substantial amount of land on a share rent contract. The landlord’s share of input costs was limited to long term fertilization, primarily lime. The landlord was also adamant that the grower plant certain crops that disregarded short and long term economics, instead of following a rotation. When extreme input price increases occurred, the grower’s profitability was limited due to narrower margins, since the landlord’s input cost share was limited. The Grafton Ag analyst conducted a thorough analysis of each tract of land rented from the landlord, and using the yield potential of each crop, was able to rate the tracts based upon potential profit. The client was able to successfully re-negotiate some of the land rent to cash rent, reducing the percentage of share rent, and allowing for more reliable profitability potential and business growth.