by peter hughes
‘Income and expenditure I understood, but when
I heard our auditors talking about depreciation, I panicked.’
It was tradition in our family to visit a neighbouring farmer for tea on Sunday afternoons. We would pile into the Chev or Ford – there were only two brands of car in those days – and wind our way out of town to the farm roads. At the farm gate we passed out sweets to the kids that opened it for us.
After arrival and the greetings and a glass of homemade ginger beer, we kids were told to disappear. When, much later, we were called to the house, the quiet tea-time chuckles had been replaced with raucous laughter, and the cold teanow seemed to be served in iced glasses. farm shed for a town kid was a magical place. The workbench with half-dismantled engines; the tool cupboard; the ploughs, mowers and hay rakes; and holy of holies, the tractors. There were also only two kinds, the Vaaljapie Ferguson and Massey Harris – the sort you see in museums these days.
I would make-believe drive the Vaaljapie for hours. I was about four years old, holding my dad’s hand, when the farmer walked us out to a nearby field which was being ploughed. The farmer picked me up and put me on the driver’s lap. soil was moist and rich, and as I write I can smell that special fresh earthy aroma. It was beautiful, and for all the wrong reasons, it was the day I decided to become a farmer. W hen the time came, it was a forgone conclusion – I would study agriculture. I got along fine in my first job. After all, I understood how to produce crops, beef and chicken. I knew all about dairying. Of course I had to learn to set a plough, to survey a contour and to weld a broken implement, but I got on OK. As time went on, I started getting drawn into the commercial end of the business. Now this was in foreign territory. Income and expenditure I understood, but when I heard our auditors talking about depreciation, I panicked.
What the hell was this? It obviously had something to do with money, but what did it mean? When they added it back as a “non-cash item” to profit in order to calculate cash flow, I was completely mystified. they mentioned amortisation, current ratio and headline earnings, I realised that I was agriculturally literate but financially illiterate. It was a shock.
Farming for me was fresh moist soil, gambolling new-born lambs, cheeping fluffy day-old chicks, and young mealie plants pushing their way through the earth. T here are of course these joys. And they are all beautiful. But the reality is that unless you know how to do an operating and capital budget; how to calculate cash flow; what depreciation means; and what opportunity and marginal cost is, you may soon be in the city looking for a job instead of savouring those special sights, sounds and smells. Are you financially literate? And if not, what are you doing about it? |fw
Contact Peter Hughes on (013) 745 7303 or e-mail [email protected]. |fw