For you to manage your farming business effectively, you should do thorough, timely record keeping and analysis of the financial reports monthly.
This will ensure that you make informed decisions when it comes to your business investments.
Record keeping is done through bookkeeping – either daily or monthly.
Bookkeeping is the methodical recording of financial transactions in the accounting books for accurate determination of profits and losses within the agricultural business.
Simply put, bookkeeping refers to taking account of the financial transactions of any business.
The question is then, why does this matter, why do you need to take bookkeeping seriously?
It matters because it is fundamental to the effective management of agribusinesses.
The farming business should be no different from any other business. Financial record keeping is more important today than ever before, especially given the current economic conditions.
Accurate bookkeeping is important to the financial well-being of any enterprise, and agribusiness is not exempted. It is thus imperative for the following reasons:
1. Bookkeeping helps you track the income and expenses of the business; it helps in trend analysis over a given period of time to understand where money is wasted or gained.
2. It is essential when applying for business loans/credit (showing your ability to pay back the loans).
3. It enhances the accuracy of your budget.
4. It becomes the basis of forecasting for the next month or the following year.
5. It shows the price changes in livestock auctions and crop sales (shows the best season to sell or buy).
6. Bookkeeping becomes the basis of financial reports for tax assessment and submissions.
More importantly, bookkeeping will enhance the management of the financial stability of the agribusiness.
Without bookkeeping, an agripreneur/farmer risks running into cash flow problems, wasting money and losing out on opportunities to develop their business further.
More importantly, it may improve the sustainability and profitability of an agribusiness.
Farming for profit is possible; it is imperative.
Tip: Separate your personal bank accounts and transactions from those of your business.
*Mekupi Kambatuku holds an MBA and a Post Graduate Diploma in Business Administration. She has over 10 years experience in the finance sector and is currently working on completing CIMA. Kambatuku writes in her personal capacity as a farmer. admin@simpliadvisory.com, www.simpliadvisory.com