In order for you to manage your farming business effectively, you must perform thorough and timely record keeping and analysis of financial reports each month.
This will allow you to make informed decisions regarding your business investments.
Record keeping is done through bookkeeping – daily or monthly.
Accounting is the methodical recording of financial transactions in the books of accounts for an accurate determination of profits and losses within the farming business.
In simple terms, accounting refers to the consideration of the financial transactions of any business.
The question then is, why is it important, why do you need to take accounting seriously?
This is important 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, especially given the current economic conditions.
Accurate accounting is important for the financial well-being of any business, and agribusiness is not exempt. It is therefore imperative for the following reasons:
1. Accounting helps you track business income and expenses; it helps in trend analysis over a period of time to understand where money is wasted or earned.
2. It is essential when applying for loans/trade credits (showing your ability to repay loans).
3. It improves the accuracy of your budget.
4. It becomes the basis of forecasts for the following month or the following year.
5. It shows price changes in livestock auctions and crop sales (shows the best season to sell or buy).
6. Accounting becomes the basis of financial reporting for valuation and tax submissions.
More importantly, accounting will improve the management of financial stability in agribusiness.
Without accounting, an agripreneur/farmer risks running into cash flow problems, wasting money and losing opportunities to further develop their business.
More importantly, it can improve the sustainability and profitability of an agribusiness.
Farming for profit is possible; It’s imperative.
Tip: Separate your personal bank accounts and transactions from those of your business.
*Mekupi Kambatuku holds an MBA and a graduate degree in business administration. She has more than 10 years of experience in the financial sector and is currently working on the realization of CIMA. Kambatuku writes in her personal capacity as a farmer. [email protected], www.simpliadvisory.com