I am very much thankful to Manager for providing such platform which is very helpful for the small and midsized businesses.
Business Introduction:
I am going to start layer farming business in which chickens (Layers) produce eggs which are sold to the end customer through the marketing strategies. Initially i am starting this business with 60000 layers which will be purchased as day old chicken (DOC) and will be fed for 18 weeks until it reaches to point of production (start laying eggs). 1st phase is rearing and the second phase is laying of the complete 1 cycle and so on.
Question:
Using Manager application for keeping record of all business related matters, how can i keep record of DOCs that how many have been purchased and when ? then how can i keep record of daily production of eggs to find out the production efficiency that how many layers have been laying eggs on daily basis. Which is the current cycle or flock of chickens (1 , 2 and so on ) and when DOC was transferred to egg production unit. As there are four production lines in the production unit so how many eggs have been produced from each production line etc. There are few process parameters like building temperature, air, any ill or died etc. which are to be recorded to monitor the process performance which actually has nothing to do with financial matters. As using Manger for keeping record of accounts so i would like to use Manager for this purpose too if possible. or how to use existing Manager’s fields and parameters to achieve results mentioned above.
after 18 weeks, convert the DOC to Layers through Production Orders.
read this guide Manager Guides
the finished good will be Layers and bill of materials would be DOC.
use Production Orders as above. Eggs from Layers.
can be identified if you created the inventory with a date or any identifiable suffix as mentioned earlier.
this is possible by inventory write-off. read this guide Manager Guides
This wont work, if you have 1000 layers and they produce 1000 eggs, then via the production order you will have zero layers, yet those same layers may produce another 100 eggs each so you end up with minus layers.
As the business is agriculture based then production has no value until sold. This is no different to a produce farmer who collects beans, tomatoes etc daily, the cultivated production has no accounting value. Recording production efficiency is done via a spreadsheet programme, not an accounting programme.
yes i have tried and it gave me negative results after two days of egg production. it means we can not define DOC, Layer or eggs as an inventory items.
So what is other possibility to keep the record of daily produced eggs as finished product in this Manager applicaton
You can define DOC to Layers as inventory items, but not Layer to eggs.
You can’t record daily produced eggs as finished product because accounting needs double entry. If you debit Inventory > Eggs there is no other account to credit. Besides the eggs have no value until they are sold, because they are a by-product of nature.
Spreadsheet recording is the only other possibility.
ok i just checked something and it seems in Production Orders you can produce a finished item without selecting any bill of materials. so it would be possible to record the daily eggs produced without affecting the layers.
yes it keeps adding the eggs produced daily with the layers have been converted from DOC. So it don’t think so i can use this Manger for what i want to achieve. The only way is to modify the Manger with respect to farming businesses or the Manager tea give out the solution from the existing one.
My immediate thought was that it is not appropriate to record either DOCs or Layers as inventory items, because neither is held for sale or to be consumed in production. These chickens are assets, however, because they are a means of production and will generate future income. But they are probably not depreciable fixed assets because of their short lives.
@sa1982, I think you need to consult an accountant experienced in livestock and agricultural accounting in your tax jurisdiction. Once the accountant has helped you design a proper chart of accounts and accounting workflow, forum members can give advice on how to implement those in Manager.
thanks for the reply, this is what i have been told by the consultant when i presented him the Manger application that. 60K DOC have been purchased which is a total expense until it comes to point of laying eggs (after 18 Months). 5% of the total DOCs have been dead so 57500 have become a layers now. Which lay eggs every day upto 18 months with 2 days rest in every month. so base on estimated roughly 55000+ eggs being laid every day and which are being sold as well. so the consultant was worried how we will capture daily production vs layers to find out the production efficiency.
after 18months of production these layers will be sold out and new layers will be prepared to from DOCs by staring over the process.
Production efficiency is not the kind of thing that is going to be captured in any accounting program. That’s a question for some form of manufacturing management software. As @Brucanna suggested, you could do a lot with spreadsheets. But accounting software isn’t going to help you track the effects of temperature, feed changes, etc. on production rates.
It doesn’t sound like your consultant is an accountant. From an accounting perspective, your situation is not so complex. You have expenses for purchase of DOCs, feed, water, utilities, etc. You have revenue from sale of eggs, and layers. You might not need any inventory items at all, because you are not holding eggs or layers in stock for sale. Once they are marketable (as soon as laid for eggs or after 18 months for layers), you sell them. This conceptual arrangement is what you need the accountant for, because there are probably tax compliance issues wrapped up in all this.
I got your point. Temperature feed etc. was mine speculation that is there any way in that tool to record data for monitoring purpose which has nothing to do with financial matter as i said in my first post. because i wanted all solutions under one roof. so that i just need to maintain one book of record.
The DOC’s would be raw material inputs which are converted via Production Order into Layers which are subsequently sold so Inventory would be very appropriate to manage those numbers.
Using Inventory Items as a management tool for items which aren’t being sold is entirely appropriate.
Take an accommodation business where inventory items can be used to record and manage items like bedding (sheets, pillowcases, blankets), bathroom supplies (shampoos, conditioners) and other room consumables (pens, pads).
@Brucanna, what is your view on how your latest comments relate to your earlier ones about agricultural production having no value until sold? In your first response, you said, “…production has no value until sold.” In your second one, you said “…the eggs have no value until they are sold, because they are a by-product of nature.”
As I see things, the DOCs and layers might be considered the same items. There are no production steps involved with transformation of a DOC into a layer, only time. And the layers seem similar to those sheets and blankets you mentioned: assets used to generate income. Consumables you offered as examples seem like consumable supplies. Both are things you would count and manage, but possibly not value as inventory. Even if you did, they are meant for consumption in the production of income. The layers are not automatically intended for consumption. Their planned sale reflects only an expectation of declining production with age. That sounds more like disposal of capital items.
Agricultural production is an area where tax policy, not accounting reality, often rules. So regardless of what either of us think, legal dictates in @sa1982’s jurisdiction might end up as the deciding factor about whether DOCs, layers, or eggs can be considered inventory or some other form of asset. More reasons to consult the local accountant with expertise in the field.
Yes. The DOC’s do have an inventory value as they are purchased, so aren’t a by-product of nature within this business like the eggs are. That purchase value in time converts into layers, in fact you don’t need to use a Production Order, you could just rename the Inventory item from “DOC Jan 1 2018” into “Layers Jan 1 2018”, but it provides an opportunity to adjust quantities.
There maybe no production steps but there can be re-classification - heifer calf into breeding cow. Also, layers (or sheep) being “livestock” can’t by definition (reproductive) be the same as consumables (non-reproductive) yet they both can be managed via inventory management.
While some items could be deemed as consumables, that doesn’t mean that they need to be expensed on purchase because that bulk purchase could greatly distort your P&L so it can be more appropriate to expense those consumables (via inventory) as they are used to generate income - the principle of revenue matching.
Usage of Inventory doesn’t have to imply “intended for consumption” - e.g. users who manage their trading shareholdings via inventory items. Plus, livestock is never considered to be capital items as they can’t be depreciated - even if the bull was purchased for 100,000, it just forms part of the herd inventory / valuation.
But you are still required to have the accounting reality first, as any tax policy can only be applied to those accounting events after they have occurred, not before, and then aspects of those policies may only occur within the tax return itself, not noted within the BS / P&L accounts.
As clearly stated - Inventory Items as a management tool. So for 364 days the accounting system is proactively used and on the 365th, balance day adjustments are made to suit any particular tax requirements. This may challenge some traditionalists.
Hi, am enjoying this thread as I be setting up a stud sheep account some time in the near future.
Depending on how intricate you want to be, the DOCs have a cost to mature to Layers as you have to feed them, plus other input costs, which could be done through Production order and then add Non-inventory cost to production to show this.
If in Australia the ATO has some good resources Valuing livestock | Australian Taxation Office these include natural increase costs.
We also have to keep a DPI stock inventory which I think can be achieve through Manager and the inventory module.
Yes, you could “capitalise” the feed and other costs into the inventory value of the Layers, but then those development costs would remain stored within that inventory value until the Layers were eventually disposed of.
Alternatively, you could store those costs (first 18 weeks) into an Asset > Layer Development account and then write them off over the 18 month productive life of the layer.
Funny you should mention the cost to mature, @KateG. I was thinking about that and the difficulty of accounting for conversion of DOCs to Layers through a production order. Production orders are really conceived for short-term manufacturing events rather than the 18-week maturation cycle of chicks. You would be incurring all sorts of expenses, only to “produce” Layers 18 weeks later. That argues for a way to track feed, antibiotics, heat, labor, and other costs on an interim basis until they could be incorporated into the cost of Layers via a production order. Not easy.
I doubt any of us are the first to think about the problem, though. Surely there are established practices in the industry.