How Do Your Local Savings Stack Up?

Agribusiness

By: Dave Thomsen, CPA, Partner | email

Local Savings are the key to maintaining a viable cooperative. You hear it from us in every audit meeting report, from the bank, and at management and director training programs you attend. The percentage of local savings is the key factor in determining a cooperative’s profitability. It is the cornerstone for providing essential benefits to the member patrons of your companies, such as; needed facilities and equipment, the ability to hire and maintain high quality employees, pay patronage, and subsequently redeem any deferred patronage through estate and equity retirement payments.

So, how do you know if you’re generating adequate local savings? Hopefully you are doing many of the items mentioned above; growing, adding new assets, keeping good employees­– meeting the needs of your patrons, and of course, keeping your banker happy! Though there are several factors to consider, most cooperatives use a percentage number, local savings divided by sales, to determine if their local savings are on the right track. Depending on your cooperative’s mix of grain and supply sales, as well as commodity prices, that percentage should be in the 1 – 3% range. Our clients have been very profitable throughout the last several years. The following is an average of what we have seen over the past three year period:

• Sales up to $50 million = 1.75%

• Sales $500 - $150 million = 2.06%

• Sales $150 - $300 million = 1.92%

• Sales over $300 million = 1.48%

So, how does your local savings stack up? We know that every cooperative faces it’s own unique set of challenges and growth opportunities. If you’d like to discuss possible ways to improve your local savings, we’d be happy to speak with you.

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