MiniMilkBiz - a tool to check business health

How do you tell if your dairy business is heading in the direction you want it to? Is it ‘gut sense’ or can you quantify it? MiniMilkBiz is a tool that we have recently updated that allows you to generate some rich physical and financial reports to see how your milking herd is currently performing. This episode explains MiniMilkBiz, what information is required and outlines the two key reports that are generated. The show notes contain a link to download the tool from our website.

Learn more:

MiniMilkBiz

Dairy Standard Chart of Accounts

DairyBase

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It is brought to you in partnership the Hunter Local Land Services

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The information discussed in this podcast are for informative and educational purposes only and do not constitute advice. 

Transcript

The Business of Dairy

Episode #51 Transcript – MiniMilkBiz – A tool to check business health

Sheena Carter:  Welcome to the Business of Dairy podcast. I'm your host, Sheena Carter. Planning a road trip these days is pretty easy thanks to the tech we have at our fingertips. I doubt many of you are still unfolding paper maps or flipping through old street directories to find your way around big cities. And if you're a younger listener, you might have no idea what I'm talking about. Never having had to trace a road across pages or add up distances between towns to figure out how long a trip might take. Ah, the good old days. Now, we just plug our destination into a mapping app. It tells us how far it is, how long it'll take, and even gives us a few different options to get to our destination. Best of all, if we take a wrong turn, it autocorrects and gets us back on track. So why am I talking about road trips? Well, we've recently released an updated version of a tool called MiniMilkBiz, which is freely available on our website.

MiniMilkBiz can help you assess how your dairy business is performing and whether it's on track to reach your goals by year's end. So what is MiniMilkBiz? It's not an app, but it's a spreadsheet. So it's simple to use and packed with insights. You enter a few easily accessible bits of information and it generates two comprehensive reports that give you a snapshot of your business's physical and financial performance for the period you're analysing. The reports help you spot areas that might need attention now rather than waiting until the end of the year and wondering what went wrong. So it's a reminder to you that daily decisions have a big impact on overall performance. So in a way, MiniMilkBiz is like your mapping app. It can help you as a farmer or advisor to identify if you're off course and reset your direction.

Earlier this year, we ran a few farmer workshops using MiniMilkBiz and the feedback was really positive. Farmers appreciated having a tool that helped them look at their business objectively and said they'd continue using it to track performance over time or as things changed in their businesses. 

So how do you get started with MiniMilkBiz? Since this is a podcast and I can't show you visuals, I won't walk you through every step of using the tool, but I'll try to explain the basics and I encourage you to search for MiniMilkBiz and that's biz with a z at the end – MiniMilkBiz – do a search for MiniMilkBiz or check the show notes for a direct link to download it from our website but if you've got Excel on your phone or tablet you can even view it on the go as you're listening to the podcast.

So what is what is the information that you need? It needs some pretty easily accessible key numbers for the period you want to analyse. So these include the number of cows being milked; the milking area; the milk produced, or the vat volume sold for that the day, the week, the period you're analysing; and the quantity and cost of the feed fed to the milking herd and your milk price. S o we are really looking at what is happening on the milking platform and with the milking herd here.

Now, I also need to clarify what MiniMilkBiz is and what it isn't. So it's a tool that looks at your performance from an indicative cash perspective. It focuses purely on your feeding of the milking herd on the milking platform. So the quantities fed of both homegrown and purchased feed and the cost of each of these feeds. Now, noting that our feed costs are the largest operating cost in a dairy business, so it's very important that the quality feed is being fed and efficiently converted into milk by the herd. So it uses your actual feed costs and milk income, and that milk income is based on your milk price, the volume sold and its fat and protein content for the period you're analysing. So this is information you've got at your fingertips each day.

When you set the tool up, you select your milk payment system so that's either in cents per litre or dollars per kilo milk solids and that's just from a drop-down box. For all the other cash costs – operating cash costs in the business that aren't feed costs – it uses an average of the Dairy Farm Monitor data for the region in which you operate. So MiniMilkBiz can be used in all dairying regions of Australia. 

The cash costs we're looking at here are herd, shed, paid labour, repairs and maintenance, and all other cash overhead costs, so things like farm insurance, rates, those type of things. We've also included finance costs, which are interest and lease costs, noting that these are going to be unique to your situation and risk appetite. If you happen to have your own DairyBase report, in the setup tab you can select custom data and you enter your own figures in to tailor it a bit better for your business. 

So the cash report that's generated, which we call the Cash Predictor Report, is aligned with the Dairy Standard Chart of Accounts, which I'll put a link in the show notes for the Dairy Chart of Accounts. And it is aligned with Australian dairy industry terminology. So if you don't have a DairyBase report, but your accounting software is aligned with the Dairy Standard Chart of Accounts, you could also use the custom feature to enter your own figures from a cash report out of your accounting software. 

Now on to what it isn't. So MiniMilkBiz isn't a complete business financial analysis tool like DairyBase, which is freely available online. If you want to know how profitable your business is, DairyBase is the tool for you and you can get into more of the finer details about the whole farm business.

So while MiniMilkBiz focuses heavily on feed inputs and costs, it is not a ration formulation tool. It only looks at the feeds that you've fed to the milkers and the milk produced from that feed that was fed. And it isn't a true cash flow tool. It doesn't look at your opening cash balance and the actual flow of cash in and out for that period – the actual expenses that you're covering for the period. It's based on that average industry data for the period that you're analysing. So it's just averaged over that period. And as I mentioned, it's not showing you your actual cash on hand at the end of the period being analysed.

Now on to the reports. There's essentially two main reports that are generated as follows. First of all, we've got the Cash Predictor Report for the period you're analysing, which also contains a daily key performance indicator or KPI, daily KPI report. Now, I keep saying the period you're analysing, and this is one of the great features of MiniMilkBiz. You can choose to enter anything from a single day to a week to a month or a whole year, so long as you've got the necessary feed and milk production data to enter. In my view if you want to analyse a year I'd be using DairyBase but you get my point, it's very flexible. So the Cash Predictor Report looks at the period analysed and gives you the actual milk income and then total farm cash income using the average of the farm monitor data. So it accounts for some livestock sales income and, inverted commas, “other” farm cash income, so you know, feed, water sales.

The feed costs are split into purchased and homegrown feed costs and they're based on what you entered as being fed to the milkers. So the herd and shed costs are derived using the farm monitor data and so are all the other overhead costs and the finance costs. So this report will tell you your indicative total farm cash income, total variable costs, total overhead costs, farm working expenses, farm operating cash costs, and net farm cash position. 

Now the next exciting thing is that you can look at these numbers as total dollars, dollars per kilo of milk solids, cents per litre, dollars per cow, dollars per milking hectare or as a percent of income in the report, whatever suits you best. 

Below the Cash Predictor Report is the daily KPI report. It uses all the information mentioned to calculate things like margin over feed cost, production required per cow to cover feed costs, and also looks at things like the percentage of milk production from homegrown feed. Now, as with any case where we're looking at numbers, it's important when you're looking at these numbers that you context them. Context them with your feeding system, the time of year, the seasonal conditions and all sorts of other variables. Not to make excuses, but to explain and identify where there may or may not be an issue. And I'll give you an example of this in a minute. 

Now, another thing to be mindful of is margin over feed cost. So margin over feed cost is simply milk income minus all your feed costs. So the money left over has to now pay all the other cash costs in your business. So while your margin over feed cost may look like it's quite strong, if all your other costs are significant, then you may have an issue that needs to be looked at. So we've set up a colour coding system for margin over feed cost in the report. If it's highlighted in green, then your margin is greater than that required to cover all the other cash costs that are accounted for in the tool. There will be other cash costs in your business that aren't in the tool, such as capital expenditure and drawings. If it's orange, it doesn't cover all the costs for the day – the cash costs for the day in that period being analysed. So remember you're not actually looking at true cash flow and you need to context the numbers with what is going on in the business at the time. So for example it might be autumn. Autumn is generally sowing time and you might be feeding most of the milk ration as hay or silage along with the concentrate that they'd be getting because most of your paddocks might be locked up being sown. So your margin over feed cost might be orange, indicating that it isn't covering all the other costs in the business. But you don't necessarily need to get too stressed here. Feed costs can be high at that time of year, with less feed coming from that directly grazed pasture in a pasture-based system. So there's colour coding for a few other parameters throughout the reports, such as with the percentage of production from homegrown feed. So if you're in the spreadsheet you can hover over these cells and there is an explanation about the colour coding that pops up in a little box. 

Now before we leave our KPI report and margin over feed cost I do want to clarify that while the calculation for margin over feed cost is simple there are many things within a farmer's control that will influence the actual number. So while you don't have a great deal of control over milk price, you can definitely influence your herd's milk production.

 So some of the key things here are centred around herd management and pasture and feed management. So things such as having good reproductive performance or herd fertility and having cows come into the milking herd in the right body condition score, as well as having excellent grazing management skills to ensure intake of quality pasture and managing fodder conservation so that your hay and silage is high quality. And then there's things like forward contracting of feed purchases. These are just some of the examples of things that will influence quality milk production and a strong margin over feed cost.

The second report I want to highlight is the Program Summary Report. Now, this is a great one-page report that, again, summarises a lot of information, some of which you've already come across in the Cash Predictor and KPI report, and some that is new. So, most of it is centred around the milker diet. There is a diet section that gives you an indication of the amount of pasture grazed by the herd, which is based on a back calculation. It'll give you an estimate of how much pasture is being utilised in terms of kilograms of dry matter per hectare per day. So if you've got a good idea about what the actual pasture growth rate is at that point in time, it can be a reasonable indicator as to whether the cows are consuming the pasture faster or slower than the rate at which it is growing. However, Make sure you get into the paddock and sense check what the numbers are telling you. There's numerous reasons why that number, what that number says it is, may not be the reality in the paddock. It also will calculate things like feed conversion efficiency, which is worth checking, and it provides some great pie charts that represent the different components of the diet composition and also your cost structure in that period of analysis.

Now, using the reports, if you've generated your own report and you're not sure where to start looking to see if you're on track or if things aren't looking ideal, I would start looking at items in the report that are highlighted in the green, the orange or the red and try and understand what's going on there. So work backwards and see what might be influencing those numbers. And sit down with a trusted advisor and talk through the report with them. They might have the knowledge and skills to help you make adjustments or be able to point you in the direction of someone else who can assist. 

If you're an advisor and you're visiting a farm that you know very little about, MiniMilkBiz can be a great tool to help you get an initial understanding of how a business might be performing without having to do a full business analysis, which as we know, takes a significant amount of time. 

So in conclusion, I would encourage you to try the tool out for yourself. See what it reveals about your current business performance and understand if it's going to get you where you want to go with your business journey for the coming year. And remember, there are links in the show notes to MiniMilkBiz, the Dairy Standard Chart of Accounts and DairyBase. And as always, feel free to reach out if you have any queries or would like some assistance using MiniMilkBiz.

That's all for today's episode of The Business of Dairy. We hope you enjoyed diving into the fascinating world of dairy farming and industry insights. As we continue to expand and evolve, we greatly appreciate your support. Our show is thriving, attracting new listeners each week, but we believe there's always room to grow and we need your help to make it happen. If you've found value in our discussions, we kindly ask you to take a moment to rate and leave a comment about the podcast. on your preferred platform. Your feedback not only lets us know what you enjoy but also helps boost our visibility to others who might benefit from our content. I sincerely thank you for being part of our community and we look forward to bringing you more engaging episodes in the future with the continued funding and support of the Hunter Local Land Services. Until next time, stay curious and keep milking those opportunities.