If there was just one thing you could do in your farm that would instantly increase profit, would you do it? Of course you would. The sad fact is, however, that very few business owners have been told about this step.
If you have more than one crop on your farm, this step will provide information that may surprise you. The key is to split apart the financial data so that you can see the figures for revenue and associated costs for every crop.
Consider the following example. A farm growing wheat, oats and barley. The farm was doing well, making good profits but even though the farm profits were fine and they knew the income per crop, they weren’t completely sure about which crop was giving the best results.
With some changes to the way their accounting system was set up and changes to the data entry they were able to record the costs relating to each of the crops separately. After entering the data in this way, they reviewed the profit position for each of the crops.
Interesting results emerged. One of the crops was making really good profit margins. One of the crops was making a reasonable profit, whilst the third crops was losing them money.
Armed with this information, the farmer was able to delve further into the loss making crop with a view to identifying why the losses were incurring and then what he could do to reduce the costs, improve productivity and whether there was any scope for increasing margin to the point that made the crop worthwhile.
Are you getting this level of information in your farm accounts? If not, then find a way to start recording your financial information in a manner that will allow you to get this information so that you can identify whether you’re losing money on one or more of your crops. Once you have the data, you can make an informed decision about what to do in the future.