Would a robotic milking system be a sound investment for Midway Dairy?
Dairy manager Dave Gerratt asked the question recently during the weekly board meeting of Ida-Gold Farms’ general partners in southeastern Idaho.
The third-generation family business includes a 4,000-cow dairy north of Malta and a sprawling 8,000-acre farm that produces potatoes, alfalfa, grain and corn. Gerratt’s cousin, Todd Gerratt, oversees crop production.
To answer the question, they turned to their certified public accountants at Condie Stoker and Associates in nearby Rupert.
“A financial analysis showed we couldn’t cover our existing debt while adding more debt with a new robotic system,” Gerratt says. “It would have worked if we were building a new facility or were debt-free.”
For the Gerratts, their accountants are indispensable.
“We need to know the unit cost of production, whether it’s 100 pounds of milk, a bushel of wheat, or a 100-pound sack of potatoes,” Gerratt says. “When agreeing to contracts, we make our decisions based on that information.”
The Gerratts have relied on the Rupert accounting firm for more than two decades. The accountants’ analysis was crucial several years ago when Ida-Gold expanded into an existing trucking company and a precision fertilizer application business with their joint venture partners Schaeffer Farms, Jones Farms and Circle G Farms.
“We swap equipment and employees,” Todd Gerratt says. “Equipment has become so expensive that we maximize use by putting trucks, equipment and employees wherever they’re needed.”
When the Gerratts’ grandfather, Don, started farming in 1939 south of Burley, the business was uncomplicated and bookkeeping was straightforward. Eventually, Don passed the business to his sons, Rex (Dave’s father), and Larry (Todd’s father).
As Dave and Todd began managing the business, increasingly complex financial issues arose, making an accounting firm essential.
“It’s not just the quarterly financial statements that our clients need to review,” says Ben Brown, a certified public accountant at Condie Stoker who works with the Gerratts. “New income tax laws and changing labor rules affect a business financially, so a good accountant has to inform clients of impending changes.”
For example, a new Labor Department rule concerning overtime pay for salaried employees was to take effect Dec. 1. Employees earning less than $47,476 annually were to receive overtime for the hours they work beyond 40 a week. A federal judge has put the rule on hold for the time being.
“The threshold used to be $23,660,” says Brown, “and it will affect some of Ida-Gold’s 100 employees.”
Whenever Ida-Gold family members consider new ideas to keep their business profitable, Gerratt says, “We ask our accountants to run scenarios, so we can make a good decision.”