Good record-keeping is essential
AGRIBUSINESS AND PROJECT
The basis for starting and developing any successful business, including farming, is a well organised set of records and accounts. Relying on memory alone can lead to misleading assumptions in future planning.
Most farmers remember the good years and not the actual recorded average yields realised. This was noted in key performance area analysis where farmers gave much higher perceived crop yields as an average at the start of the exercise. Many were surprised to go back over actual past production records to discover the reality of lower averages and incomes per hectare.
If you know the actual yields realised you will have a benchmark for your farming methods within the potential of your farm’s unique resources. Accurate records provide a tool for improvement and sound business management.
HOW TO KEEP RECORDS
The basis of farm records can be broadly sourced from records that you are officially required to keep for tax submissions. These include VAT and diesel usage claims and other data relevant to grain or animal production. On small farming enterprises these can be kept manually or electronically with commercially accounting software packages or spreadsheet programmes.
If you don’t have the necessary skills you can learn about the technology or pay a bookkeeper or an accounting firm to do it. It is better to do it yourself to have the relevant facts and data at your finger-tips. This requires much discipline over many years.
You can link the accounting information with the physical production data needed to produce gross margins and net profit calculations both systems work hand in hand.
Some farmers carry a daily journal with them at all times in which they record every aspect of a farming day including the bags or kilograms of direct inputs used per land. These can later be included in the main records kept in your office or computer.
You are required to keep detailed records of diesel usage. Keep a detailed log of which vehicles, equipment and machinery have drawn diesel each day. The use of fuel by various operations on cropping lands or pastures can also be noted. The usage can then be calculated per hectare per operation to give a known maximum use per hectare for the farm. This will help you to control any theft occurring and to make sure that you have enough diesel in stock to run your equipment.
Make sure that you control the use of resources with their input expenses for all those pertinent to crop production and for other enterprises in your farming operation. Problem areas such as insufficient crop yields or too high input costs can then be identified and corrected. It is best to update all data on a monthly basis while the information is still fresh. Regular monthly management meetings should be scheduled to discuss the records and production results.
The main records to keep
- Accounting: Asset and liabilities, receipts and expenses, capital account, credit accounts and stock on hand. The capital account will include farmland and the mechanisation component including depreciation and current to replacement valuations.
- Production and statistical records related to the production of crop and livestock enterprises.
- The overall farm business analysis combines the above to probe for strong and weak areas within the business and to calculate efficiency measures. This analysis should be done for each enterprise as well.
Publication: October 2021