There are no shortcuts – get yourself trained

‘You must know the difference between fixed and variable costs, and understand the vital concept of marginal cost and income… and it’s really a piece of cake.’

I’ve thought long and hard about it, and don’t believe any other business enterprise requires the same wide range of skills as farming. The skill and knowledge to manage the four basic business pillars – marketing, finance, production and personnel – go without saying. But look behind these, and what do you find?

You need to be a soil scientist, hydrologist, botanist, animal scientist, entomologist, mechanic, engineer and climatologist, not to mention the need to be able to understand and converse intelligently with lawyers, accountants, tax advisors, and bankers. It’s a daunting array of talents needed, and frankly when you look at it this way, it’s amazing that anyone makes a success of managing a farm. Now, no one can be competent in all these areas, but enough understanding is necessary to recognise the major pitfalls in each area, and know to whom you can turn for advice or training.

In general, farmers are production animals. Their focus, skills and experience equip them well in the soil, water, mechanics, and engineering areas. They’re often lacking in the finance, marketing, legal or tax areas, and they appreciate this. It’s borne out by the response I get to this column. If I write about production issues, the phone seldom rings during the following week. If I write about accounting or marketing matters, it rings frequently.

Finance and accounting, especially, are a bit of a black hole for most, and I often get questions from readers looking for ways to improve their financial literacy. “What can I do to properly equip myself to understand the finances of my business?” and, “I’m lost when it comes to money issues. Can you help?” You don’t have to turn yourself into an accountant, but you must know the purpose of an income statement, balance sheet and cash flow statement and how to read them.

You must know the difference between fixed and variable costs, and understand the vital concept of marginal cost and income… and it’s really a piece of cake. I’m an entomologist, for goodness’ sake, and I understand these things for one reason only – I spent the time and money necessary to get myself reasonably financially literate. I hear you say – where do I go and what do I need to do? Well, for a start, get onto the internet and go to www.google.co.za. Now type in “short course financial literacy training” and search the pages from South Africa. When I did it I got 51 500 hits in exactly 0,08 seconds.

Among the first 10, I found the Universities of Pretoria, Johannesburg and Cape Town all offered courses. I also found numerous other possibilities from other organisations, offering courses of different lengths and costs. There are no shortcuts. You simply have to devote the time and money and attend a course. It’s a wonderful experience as the scales fall from your eyes, and you suddenly understand the shorthand and simplicity in the world of finance. Contact Peter Hughes on (031) 745 7303 or e-mail [email protected].