Farming businesses make many decisions every day. Some of these decisions have a direct impact on how much money is made or lost.
The attached 4 page fact sheet (pdf 303 kb), provides some simple ways to help you make better decisions.
The following tools will be helpful, but they do not replace the need for a good business plan and detailed financial analysis for the big decisions and investments. There are people and companies who can help.
Key Points :
It is important to plan well and make informed decisions as: ‘failing to plan is planning to fail’. Some decisions will also have credit and taxation implications and professional advice should be obtained.
- ‘Good decisions are made with good information’. Budget, plan and assess the financial data to make confident decisions.
- Know and manage your ‘variable’ and ‘overhead’ costs. Where possible benchmark costs with other producers.
- Improve ‘profit’ by maximising revenue from your crop. Create plans and ‘cash flow budgets’.
- Capital (either cash or borrowings) needs to be used efficiently. Think about the real cost of owning and operating infrastructure and machinery and the appropriate scale of area farmed.
- Carefully plan for expansion and ensure that there is sufficient operating profit to meet debt repayments. Also consider the risks of increased debt versus the opportunities to expand and improve efficiency
While a decision might make the most money, it may result in less family time and more stress; it is important to consider impacts on people and resources when making financial decisions.
These tools are not designed to be a complete solution to the financial management of your business, only to stimulate thinking about the best way of analysing and solving a particular situation or problem.
Often is it helpful to get another opinion from an experienced consultant or accountant so that you can make the best decision possible for your situation.
See Also :
Business Decision Making
Gross Margins using VegTool
Cash-Flow and Budgeting