Business Information Management

Information is the building block that forms the foundation for sound business management decision making. Business information management is the mortar that holds the blocks together to form the structure.

As progressive dairy producers and dairy professional who serve progressive producers, you have access to an abundance of data; both, internally and externally. Managing that data to provide meaningful information can mean the difference between operating a highly successful business or one that is merely average.

Information management (IM) is the process of transforming data into useable information for the purpose of making decisions. These links offer the tools, techniques, and strategies necessary to improve information management on your dairy:

• Profit Strategies
• Programs
• Publications
• Tools
• Additional Resource Links

Keep in mind that there are six steps to business information management. These six steps will help you make the most of the tools, techniques, and strategies outlined on this website:

Six Steps to Business Information Management:

• Step 1 – Collection: Data collection involves the making observations and recording of events and outcomes. If you pay a bill and you write the information in a checkbook ledger, you have collected the data. However, it has little meaning and you cannot use that data to make decisions unless it has been subject to the subsequent steps in the IM process.
• Step 2 – Data Collection: Data organization provides structure to the data so it can be processed and reported. One of the best examples of data organization is the national DHI program, which has done an excellent job in defining parameters and setting up a structural system for organizing production data.  In accounting data, the structure is established through the chart of accounts. The chart of accounts organizes data into different account types (income, expenses, assets, liabilities, and equity).  Account types are further organized into categories and sub accounts. Dairy Alliance, in cooperation with professional dairy advisors throughout Pennsylvania and the Northeast, has developed a standardized chart of accounts for organizing financial data of dairy businesses.
• Step 3 – Processing: Data processing also consists of a number of stages. Data processing begins with data entry. By entering data from the checkbook ledger into an accounting book or computer program in accordance with the chart of accounts it begins to take on structure. However, raw data provides little information, even when organized, without being further processed. The financial data that was collected in the checkbook ledger and entered into an account book has little meaning until all the figures are processed. Account entries must be summed for each account category; expenses subtracted from income, profits added to equity, ratios calculated and so on.
• Step 4 – Reporting: After data has been processed, it must be presented in a manner that we can review and understand. The most common forms for reporting financial data include balance sheets, profit and loss statements, cash flow analyses and others. Business owners and their advisors (accountants, lenders and business consultants) can examine these reports and quickly assess the financial condition of a business, if data is properly collected, organized and processed. Different circumstances will require varied levels of detail from the reporting process. A single page income statement (P&L) may suffice the needs of the lenders, yet be inadequate for a business consultant to identify specific areas of the business that are losing money.
• Step 5 – Integration: Reports are important in data interpretation. However, it is necessary to integrate the data from various reports to provide deeper insight as to how a business is performing. Informatio from a balance sheet and an income statement must be integrated to calculate return on assets or return on equity. Production data must be integrated with financial data to calculate the cost of production per unit of output. Although an income statement may point out that a business is losing money, we cannot necessarily determine why that is happening unless we review production records. Through the integration of production and financial records we can perform enterprise analyses. We can only accomplish managerial cost accounting or evaluate the labor efficiency of our operations by integrating data from various information sources. On a larger scale, we must integrate data from our business with data from other businesses. In doing so, we can compare the performance of our business in different areas to industry standards or benchmarks.
• Step 6 – Utilization: The ultimate purpose of collecting all this information is to provide business owners with the tools needed to make sound decisions. My father and I collected milk production data so we could adjust the amount of feed the cows received. I have worked with operations over the years that had an abundance of information about their farming operations, yet those businesses were still struggling. The owners lacked a systematic approach to interpreting the data. They were so caught up in the amount of data they collected that they failed to focus on the information that provided the answers they were seeking. In some cases, data had been used to develop a solution to a problem, but the solution was never implemented. We can collect all the data in the world, but without that systematic approach to interpretation or without implementation of the solution, we have accomplished nothing.