How to Properly Manage Your Farm’s Finances

Introduction

If this coronavirus pandemic has taught us anything at all then I’m sure that we’ve all learned that no condition is necessarily permanent. Recently, we have heard that a lot of businesses chiefly in the aviation and hospitality sectors struggle because they simply do not have enough cash to weather the storm. Even though poultry farming is a highly lucrative business, it doesn’t necessarily mean things will always be rosy. Follow me on this magical journey as I describe some simple strategies that will keep your farm profitable and will also help to weather the storm in the event of a crisis.

Separate your farming funds from your personal funds

The mistake a lot of farmers make is that they do not view their business as a separate entity and because of this, they fail to keep proper track of their farm’s finances – let me highlight this with an example; I was keeping books for a certain farmer who had 1000 birds recently and through my financial analysis, I discovered that the farm was making an average of GH₵3,000.00 profit every month but I realized, the amount of money registered on my accounts as cash available, didn’t match what was actually available for the farmer so I asked the farmer why this was the case. He replied to me that he doesn’t know where all that money went since he believes he doesn’t live any luxurious lifestyle. Later, I advised him to draw a salary at the end of every month and create a dedicated bank account for his poultry farm. Thankfully, he took my advice and later testified that he now had better control of his finances.

Hire a bookkeeper to help you keep accurate financial records

Sure in the early stages of your business, you could easily track the finances of your business because

1. You’re not making tens of thousands of Ghana cedis every year.
2. You are not spending thousands of Ghana cedis per month on feed, vaccinations, fuel, etc.
3. You do not have any issues with employee theft.

But as time goes on, you may need an expert to help manage the financial aspects of your business. It is normal for poultry farmers when they start, to feed their birds, collect eggs and at the same time deal with customers but as their farm grows, they find that they are easily stressed out and one way to avoid this is to delegate some of the duties to other professionals and the only way to know if your farm is profitable enough to hire more employees to save you some stress is to hire a bookkeeper. Also, consistent bookkeeping keeps your employees in check because they know that if they engage and any type of fraud, they will be exposed.

Carefully evaluate any loan being offered to you before you sign the contract

Yeah I know, poultry farming is a capital intensive venture and you may not necessarily have enough funds to finance your day-to-day operations so it is always nice to have an external cash injection once in a while but be careful. There are some predatory lenders out there who prey on some farmers’ financial illiteracy to charge exorbitant interest rates; some lenders can charge farmers an interest rate as high as 12% per month. Always remember, that loans are not for free so make sure you take loans from recognized lenders or speak to your financial advisor to evaluate your loan for you – PKOM Bookkeeping can help you with this.

Diversify your Revenue Stream

Sure, your poultry farm is making you a lot of money but do you think it is a smart strategy to rely on only one source of income? So what if all your birds are wiped out by avian influenza, does that mean if the government doesn’t come to your aid, your business and your source of livelihood must go down in the drain? My answer is no! I will advise that when your farm becomes profitable set some of the money aside for passive investments. Passive investment is a form of investment which may bring you regular income but does not necessarily require you to take an active role in it. For example, when you invest GH₵10,000.00 in Ghana Government treasury bills for one year, you expect a maturity value of around GH₵11,400.00 at a 14% per annum interest rate. In this example, you didn’t necessarily work for the extra GH₵1,400.00 but it still reflected in your account and the best part is there are different examples of passive investments that yield more interests than treasury bills: Renting out a house, buying shares in companies, index funds, etc., are all viable passive investment alternatives. But a little word of caution, you are not necessarily guaranteed to make money when you invest so I advise that you do due diligence before you put your hard-earned cash in anything.

Conclusion

The fact that poultry farming is a profitable venture doesn’t necessarily mean every farmer is going to end up rich. If you want to succeed financially in your poultry farming journey, I strongly suggest that you take the above-mentioned steps seriously.