The importance of developing a farm plan or ‘road map’.
The most efficient way of getting to where you and your family want to go is to plan the route before you get started. A farm plan is the farm’s ‘road map’ to help the family get where they want to go in order to reach their goals.
There are a number of areas that must be examined in all farm businesses; efficiency, combination of enterprises, production system, marketing, labour productivity, net worth.
Good planning involves;
1. Preparing a series of alternative development options for your farm.
2. Assessing the risk involved in choosing each of the options.
3. Choosing the best option from among them.
Your aim is to achieve the best option for your family and farm business goals.
Step 1: List your resources
Make a list of resources available to your farm. This will give you a good idea of your farm’s strengths and weaknesses. Your resources include land, livestock, buildings, machinery, labour,, savings available for farm investment, BPS entitlements and off farm income etc.
Step 2: Deciding what to do
Exclude options that do not meet with the goals that you have set down for yourself, your family and your farm. A partial budget is useful at this stage.
Partial budgeting is used to assess the economics of change in the farm business. It is divided into two categories; gains and losses. If the gains are greater than the losses, the change is worthwhile and should be proceeded with.
Choosing the best option for you and your business begins only after you’ve analysed all of the alternative courses. The next step is to develop a cash flow budget for each year of the plan.
The cash flow budget is an estimate of all cash receipts and all cash expenditures expected during the time period (usually a year). A cash flow budget should be prepared for each year of the plan. It must be your best estimate of what you expect to happen.
When you are developing a farm plan seek advice from outside the farm gate. Farm planning is useful when it helps the farm family to choose the farming practices and systems that help achieve their goals.
4. How will I know if I am getting there?
The importance of forward planning and goal setting.
It is important to continuously monitor that your farm business is on the right track for your desired destination. You must therefore regularly monitor the progress of your plans; compare your actual results against the expected results built into your plans, followed by action to alleviate any problems shown up by the comparison.
The basic monitoring process involves four steps;
Step 1: Develop a system to measure performance of your farm plan
The simplest way of monitoring the developments of your farm business is to develop a set of management records and accounts for your farm business.
Farm records and accounts systems should;Provide accurate and necessary information.Provide information in a form to aid decision making.
Step 2: Keep production and financial records up to date for your plan
When such information is accurately maintained and categorised, it can be useful in monitoring the progress of your farm plan.
Step 3: Continuously compare actual records with standards established in your farm plan
This step will allow you to make well-conceived adjustments to poor performance.
Step 4: Identify and undertake corrective action needed, if any
Once your goals are specific, realistic and manageable, then monitoring the results of any changes in your plan will be easy.
If the work that you are doing isn’t helping you reach your goals, or if something just is not working out the way that you expected, it’s time to revisit the plan.
To become better and different, farmers must build on their skill base in production management by adding capabilities in business planning and control.