NOTING that it is a new year with so much hope and prospects for us farmers, what is most concerning to many of us is the lack of sufficient rain and concerns about whether we will get any more rain. 

Thus, perhaps now is the time to consider contingency plans to mitigate this crisis while it is still early, rather than later.

However, for today’s topic, we thought it important to discuss what I would say was one of the burning issues for most farmers last year – that is bookkeeping. 

At Simpli Business Advisory, being one of the fast-growing consulting firms in the country, we received a lot of queries from clients and the community about the importance of bookkeeping for farmers. 

Why should farmers and agripreneurs care about bookkeeping, especially when they have so many operational concerns to deal with? 

To this query, we say everything is important but some things are more important than others; hence the need to prioritise. Most importantly, some things need to be completed concurrently, as in dealing with these important issues at the same time, because putting it off has more dire consequences than dealing with it now, as much as possible.

What is bookkeeping, and what does it entail? Bookkeeping is the methodical recording of financial transactions in the accounting books, for accurate determination of profits and losses within the agricultural/farming business. 

Simply put, bookkeeping refers to taking account of the financial transactions of any business. For you to manage your farming business effectively, it requires thorough, timely record keeping, and the analysis of the financial transactions every month.

Record keeping is done through bookkeeping, either daily or monthly. The question is then, why does this matter, why do you need to take bookkeeping seriously for your business and farming operations? 

The farming business should be no different from any other business, and should thus be taken seriously if we are to truly see transformational changes in how we farm and the transition to commercial farming. 

Financial record keeping is more important today than ever before, especially given the current economic conditions and ongoing drought crisis. Correct bookkeeping is important to the financial well-being of any enterprise and agribusiness and cannot be exempted. 

Below are some reasons why bookkeeping is imperative:

• Bookkeeping helps you track the income and expenses of the business for a given period of time.

• It helps in trend analysis over a given period, to understand whether your business is making losses or profits and exactly where those loses occurred. Farmers can then assess the performance of their agricultural business by comparing financial data over several periods. The variance analysis will help farmers to identify trends, assess the efficiency of management strategies, and hence implement corrective measures immediately.

• Financial statements are required when applying for business loans/credit (to show your ability to pay back the loans).

• It enhances the accuracy of your budgets and tracking of your expenditures.

• It is the base of forecasting for the next month or the following year.

• It shows the price changes in Livestock auctions and crop sales, etc. (shows the best season to sell or buy).

• Becomes the basis of financial reports for Tax assessment and submissions (this is the most important point but should not be the only reason you prepare financial statements).

• More importantly, bookkeeping will enhance the management of the financial stability and profitability of the Agribusiness no matter its size. 

The lack of or absence of bookkeeping, risks agripreneur/farmer running into cash flow problems, wasting money and not knowing where the losses are coming from, and also losing out on opportunities to develop their business further. 

In conclusion, bookkeeping is an important part of farm management, providing farmers with the financial foundation that is necessary for making informed decision-making, regulatory compliance, and sustainability and profitability of agricultural businesses.

Using modern accounting tools and seeking advice from professionals may further streamline the bookkeeping process for farmers and agripreneurs.

Another tip; separate your personal bank accounts and transactions from those of your business, farming should pay you a salary and not your salary paying for farming for extended periods of time.

*Mekupi Kambatuku is the managing consultant at Simpli Business Advisory, and can be reached at admin@simpliadvisory.com.