- You are farming for profit; not to see how little money you can spend, but how much money you can make.
- Measure your profit in rands. Use rands/cash-in-hand or cents/litre or rands/ ha when comparing your performance with that of other farms. Compare carefully; don’t let the measurement units lead you astray.
- Profit has two legs, income and expenses, which must be in balance to realise a profit. Ruthless, unbalanced cost cutting will lead to a drop in income which leads to lower profit. Focusing on income (production) only generally leads to excessive expenditure and lower profit.
- Compare your financial results with a group of similar farms; identify areas where your numbers are out of line, either too low or too high. Investigate the reasons and implement corrective action.
- Money must be allocated to ensure the long-term viability of the operation.
- Debt can cripple the most efficient operation.
- Spend money on capital items based on profit not on turnover.
- Investigate and question ‘must-have’ as opposed to ‘used-to-having’ items.
- Draw up accurate, considered budgets at least twice a year. Discuss them with your bank manager and keep him/her informed of unexpected costs. Remediate discrepancies between actuals and budget.
- Keep your books yourself so that you know the finances of your operation. Your accountant generally tries to keep the tax man happy, you need to manage daily farm finances.
- Money wisely spent on herd genetics, water supply and fertiliser is money well spent.
- Management time is your most limiting resource.
You cannot manage your farm effectively if you spend all your time in front of a computer screen or underneath a tractor. Make sure that you do what requires your input and, if necessary, farm out work that detracts from your efficient management of the farm.
Small-scale to commercial farming
For more information contact Tammac Consultants on 039 834 1405 or email [email protected]
