However, the practice with many farmers is to sink money into farming without developing good farm accounting procedures and processes, which are very important to sustainable profit margin in any farming business.
Many of these farms don’t even have strict accounting discipline, the result is that huge losses will be incurred and the farm eventually shuts down operations.
The experience of many farmers is that it takes 3-5 years to be able to make significant profit from farm investment. However, some farmers can start making profit sooner if they have low overhead cost and have good production skills.
The Australian Department of Agriculture and Food advises farmers to take into considerations the following: Assess the flexibility of their business in different production scenarios; know the profit implications of pricing decisions; evaluate expenditure on inputs, and plan more effectively for the future.
The following tips will help you to increase your farm’s revenue and keep you in business for decades:
Control the expenses on your farm by strictly adhering to a budget. Every good farmer must have a budget – how much he/ she intends to spend on the farm vis-a-vis how much he or she expects as revenue – and adhere strictly to the financial plan. Failure to do so might result in spending money on areas that may not have direct bearing on the farm and/ or things not planned, which will eat deep into the farm’s revenue.
Secondly some farmers don’t even try to understand the true cost of what they produce, including indirect costs. As a farmer, try as much as possible to understand the unit cost of each item you produce in the farm and also look at how much is spent indirectly in producing it. This will also help you to knock-off wastages or leakages.
Thirdly, put in place sustainable mechanisms or processes, that will enable you to understand which of your products or produce brings more money to you and which one does less. This sort of analysis enables the farmer to consider investment in more profitable ventures.
Lastly, before you spend money in buying new assets for the farm, take an analysis of how much you are likely to make on those equipment, otherwise you could spend huge resources on buying things that will not bring any significant income to you. This is among reasons many farmers hardly make any good income from their investment.