What Is Agribusiness?

Agribusiness is the business sector encompassing farming and farming-related commercial activities. It involves all the steps required to send an agricultural good to market, namely production, processing, and distribution. This industry is an important component of the economy in countries with arable land since agricultural products can be exported.

Agribusiness treats the different aspects of raising agricultural products as an integrated system. Farmers raise animals and harvest fruits and vegetables with the help of sophisticated harvesting techniques, including the use of GPS to direct operations. Manufacturers develop increasingly efficient machines that can drive themselves. Processing plants determine the best way to clean and package livestock for shipping. While each subset of the industry is unlikely to interact directly with the consumer, each is focused on operating efficiently in order to keep prices reasonable.

Understanding Agribusiness

Market forces have a significant impact on the agribusiness sector, as do natural forces, such as changes in the earth’s climate.

• Changes in consumer taste alter what products are grown and raised. For example, a shift in consumer tastes away from red meat may cause demand—and therefore prices—for beef to fall, while increased demand for produce may shift the mix of fruits and vegetables that farmers raise. Businesses unable to rapidly change in accordance with domestic demand may look to export their products abroad. If that fails, they may not be able to compete and remain in business.
• Climate change has placed intensifying pressure on many companies in the agribusiness industry to remain relevant, and profitable, while adapting to the threats posed by large-scale shifts in weather patterns.

Agribusiness Challenges

Countries with farming industries face consistent pressures from global competition. Products such as wheat, corn, and soybeans tend to be similar in different locations, making them commodities. Remaining competitive requires agribusinesses to operate more efficiently, which can require investments in new technologies, new ways of fertilizing and watering crops, and new ways of connecting to the global market.

Global prices of agricultural products may change rapidly, making production planning a complicated activity. Farmers may also face a reduction in usable land as suburban and urban areas expand into their regions.

Use of New Technology

The use of new technology is vital to remain competitive in the global agribusiness sector. Farmers need to reduce crop costs and increase yield per square acre to remain competitive.

New drone technology is at the cutting edge of the industry. An article published in 2016 by the Massachusetts Institute of Technology (MIT) identified Six Ways Drones Are Revolutionizing Agriculture. These techniques, including soil and field analysis, planting, and crop monitoring, will be key to improving crop yields and moving the agribusiness sector forward.

Key areas of concern for the use of drone technology remain the safety of drone operations, privacy issues, and insurance-coverage questions.

Agribusiness Examples

Because agribusiness is a broad industry, it incorporates a wide range of different companies and operations. Agribusinesses include small family farms and food producers up to multinational conglomerates involved in the production of food on a national scale.

Some examples of agribusinesses include farm machinery producers such as Deere & Company, seed and agrichemical manufacturers such as Monsanto, food processing companies such as Archer Daniels Midland Company, as well as farmer’s cooperatives, agritourism companies, and makers of biofuels, animal feeds, and other related products.

What is an 8(a) Firm?

An 8(a) firm is a small business that is owned and operated by socially and economically disadvantaged citizens and that has been accepted into the 8(a) Business Development Program. This program is administered by the Small Business Administration (SBA), the United States agency charged with supporting the growth and development of small businesses. The 8(a) program is designed to help disadvantaged entrepreneurs get government contracts and access the economic mainstream in America.

How 8(a) Firm Status Works

The 8(a) status is specially granted by the SBA to any small business that qualifies, making it eligible for financial assistance, training, mentoring, and other forms of assistance. In order to qualify for this special status, businesses must be owned and operated by individuals who are considered socially and economically disadvantaged. These individuals may have been subject to racial or ethnic prejudice or cultural bias.

The 8(a) status is outlined specifically in Section 8(a) of the Small Business Act, and is designed to help small, disadvantaged businesses compete in the general market. The federal government has a stated goal of awarding at least 5% of federal contracting dollars every year to these businesses.

The Purpose of the 8(a) Business Development Program

One of the main reasons behind the creation of the 8(a) status was to increase business involvement by a broader portion of society. The SBA identifies several groups that are eligible for 8(a) status, including Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans. Someone who is not a member of one of these groups may still get into the program if they can show significant evidence of having been socially disadvantaged—for instance, due to race, ethnic origin, gender, and physical handicap, among other causes.

Through the 8(a) Business Development Program, owners can compete for special contracts, such as sole-source government contracts for which there are no competitive bids, that help level the playing field for their small businesses. These small businesses can use the program to form joint ventures with already-established businesses to form mentor-protégé relationships, as well as for management and technical assistance. Businesses must meet certain requirements to be eligible to be a protégé.

Qualifications for 8(a) Firm Status

In order to qualify to become an 8(a) firm under SBA guidelines, a business must meet the following criteria (effective July 15, 2020):

• It must be a small business.
• It must not have participated in the program before.
• At least 51% of the business must be owned and operated by U.S. citizens who are considered economically and socially disadvantaged.
• The owner’s personal net worth must be no higher than $750,000
• The owner’s average adjusted gross income (AGI) must be $350,000 or less.
• The owner must have no more than $6 million in assets.
• The owner must be of good character.
• It must show the potential for success and be able to perform successfully on contracts.

Title 13 Part 124 of the Code of Federal Regulations (CFR) spells out who qualifies for the 8(a) program as well as what counts as being economically and socially disadvantaged.

The first step: getting certified

Owners interested in taking part in the program are encouraged to do an on-line training and self-evaluation course through the 8(a) Business Development Suitability Tool. The course helps entrepreneurs determine whether or not their company meets the qualifications for the 8(a) program and if it does not, directs them to an appropriate SBA resource.

Before a firm can participate in the 8(a) program, it must first be certified at certify.SBA.gov. And small businesses that want to use the certification website must have a profile at SAM.gov, which is where companies register to do business with the U.S. government. (Contact your local SBA office if you have questions about applying.) Once you have applied, the administration will send a notification letter explaining whether the business was accepted into the 8(a) program. The certification lasts for nine years—the first four years are considered to be developmental, while the remaining five are deemed to be a transition phase. 

Small businesses that gain 8(a) status are subject to annual reviews in order to keep the designation and their good standing in the program. During these reviews, the business owner has to draw up business plans and undergo systematic evaluations. Entrepreneurs who have secured 8(a) firm status say that the application process can be lengthy and rigorous, having prior experience with government contracts can be helpful, and working hard to take advantage of the program’s benefits can make the experience very rewarding.

What Are Assurance Services?

Assurance services are a type of independent professional service usually provided by certified or chartered accountants such as certified public accountants (CPAs). Assurance services can include a review of any financial document or transaction, such as a loan, contract, or financial website. This review certifies the correctness and validity of the item being reviewed by the CPA.

Understanding Assurance Services

Assurance services are aimed at improving the quality of information for the individuals making decisions. Providing independent assurance is a way to bring comfort that the information on which one makes decisions is reliable, and therefore reduces risks, in this case, information risk.

Providers of assurance services will help clients navigate the complexities, risks, and opportunities in their partner networks by proactively managing and monitoring risks presented by third-party relationships. Businesses use assurance services to increase the transparency, relevance, and value of the information they disclose to the market and their investors. Many find by sharing business performance better, it becomes a sustainable growth and competitive differentiation strategy.

Technical guidance for certified accountants who wish to engage in assurance services can be found in the International Standard on Assurance Engagements (ISAE) 3000 and in The Assurance Sourcebook published by the Institute of Chartered Accountants in England and Wales (ICAEW) that also includes practical advice for firms choosing among different assurance services.

Certain regulations over the past years have increased the demand for assurance services, such as the Sarbanes-Oxley Act of 2002, with the goal of protecting investors from false financial information.

Types of Assurance Services

Assurance services can come in a variety of forms and are meant to provide the firm contracting the CPA with pertinent information to ease decision making. For example, the client could request that the CPA carefully go over all of the numbers and math that are on the client’s mortgage website to ensure that all of the calculations and equations are correct. Below is a list of the most common assurance services.

Risk Assessment

Entities are subjected to greater risks and more precipitous changes in fortune than ever before. Managers and investors are concerned about whether entities have identified the full scope of these risks and taken precautions to mitigate them. This service assures that an entity’s profile of business risks is comprehensive and evaluates whether the entity has appropriate systems in place to effectively manage those risks.

Business Performance Measurement

Investors and managers demand a more comprehensive information base than just financial statements; they need a “balanced scorecard.” This service evaluates whether an entity’s performance measurement system contains relevant and reliable measures for assessing the degree to which the entity’s goals and objectives are achieved or how its performance compares to its competitors.

Information Systems Reliability

Managers and other employees are more dependent on good information than ever and are increasingly demanding it online. It must be right in real-time. The focus must be on systems that are reliable by design, not correcting the data after the fact. This service assesses whether an entity’s internal information systems (financial and non-financial) provide reliable information for operating and financial decisions.

Electronic Commerce

The growth of electronic commerce has been hindered by a lack of confidence in the systems. This service assesses whether systems and tools used in electronic commerce provide appropriate data integrity, security, privacy, and reliability.

Healthcare Performance Measurement

The motivations in the $1 trillion healthcare industry have flipped 180 degrees in the last few years. The old system (fee for service) rewarded those who delivered the most services. The new system (managed care) rewards those who deliver the fewest services.

As a result, healthcare recipients and their employers are increasingly concerned about the quality and availability of healthcare services. This service provides assurance about the effectiveness of healthcare services provided by HMOs, hospitals, doctors, and other providers.

What Is After-Tax Income?

After-tax income is the net income after the deduction of all federal, state, and withholding taxes. After-tax income, also called income after taxes, represents the amount of disposable income that a consumer or firm has available to spend.

Understanding After-Tax Income

Most individual tax filers use some version of the IRS Form 1040 to calculate their taxable income, income tax due, and after-tax income. To calculate after-tax income, the deductions are subtracted from gross income. The difference is the taxable income, on which income taxes are due. After-tax income is the difference between gross income and the income tax due. 

Consider the following example: Abi Sample earns $30,000 and claims $10,000 in deductions, resulting in a taxable income of $20,000. Their federal income tax rate is 15%, making the income tax due $3,000. The after-tax income is $27,000, or the difference between gross earnings and income tax ($30,000 – $3,000 = $27,000).

Individuals can also account for state and local taxes when calculating after-tax income. When doing this, sales tax and property taxes are also excluded from gross income. Continuing with the above example, Abi Sample pays $1,000 in state income tax and $500 in municipal income tax resulting in an after-tax income of $25,500 ($27,000 – $1500 = $25,500).

Calculating After-Tax Income for Businesses

Computing after-tax income for businesses is relatively the same as for individuals. However, instead of determining gross income, enterprises begin by defining total revenues. Business expenses, as recorded on the income statement, are subtracted from total revenues producing the firm’s income. Finally, any other relevant deductions are subtracted to arrive at taxable income.

The difference between the total revenues and the business expenses and deductions is the taxable income, on which taxes will be due. The difference between the business’s income and the income tax due is the after-tax income.

After-Tax and Pretax Retirement Contributions

The terms after-tax and pretax income often refer to retirement contributions or other benefits. For example, if someone makes pretax contributions to a retirement account, those contributions are subtracted from their gross pay. After deductions are made to the gross salary amount, the employer will calculate payroll taxes.

Medicare contributions and Social Security payments are calculated on the difference after these deductions are taken from the gross salary amount. However, if the employee makes after-tax contributions to a retirement account, the employer applies taxes to the employee’s gross pay and then subtracts the retirement contributions from that amount.