As the days and weeks slip closer to the April 30 tax deadline, I inevitably think about record keeping, dragging out every receipt I’ve accumulated over the past 365 days, including crumpled feed invoices and faded fuel receipts. The question I sometimes ask myself as I sift through my records is, is it worth the effort? Beyond the bare minimum of what’s needed for tax purposes, is it really worth keeping extensive records, especially for a small farm?
Experts would argue that tracking things like expenses, production, inventory and overall flock management is important for any farm, regardless of size. According to a study commissioned by the Agri-food Management Institute and Farm Management Canada, farm business management is one of the determining factors for a successful farm enterprise.
The Dollars and Sense report identified seven practices that drive farm success, including continuing learning, making business decisions using accurate financial data, seeking out help from advisors and consultants, creating and following a business plan, monitoring cost of production, risk assessment and management, and using a budget.
So, if you want to run a profitable business, and would like to know how your birds are doing, what areas could be improved upon for efficiencies, and what your cost of production is, then record keeping is an absolute must.
What do I need to track?
Financial records include keeping track of all farm-related expenses and income, grants or funding received, tax paid, payroll and any other relevant tax information.
Maybe you know you need to keep better records, but don’t know what you should be recording to get the best overall production picture of your poultry farm. The answer is simple: everything.
Consider yourself something like Sherlock Holmes — the more information you have the better for problem solving, and determining your overall farm health. Here’s a rundown of what you should be tracking, and why:
--Inventory
Not only does keeping an accurate inventory of your birds make it easier for you to manage them, it can also be a requirement of production licensing, depending on how many birds you have and where your farm is based. From an on-farm food safety perspective, you should be tracking things like:
- where you purchased each bird (or if you hatched your own)
- date of acquisition/hatching
- slaughter dates
- mortalities
- who you sold birds to
- illness/disease
Keeping track of this kind of information can not only be important for a complete financial picture, but could also be helpful in the event of a disease outbreak or other food safety issue.
--Financial
If you want to run a profitable business, and would like to know how your birds are doing, what areas could be improved upon for efficiencies, and what.
Financial records include keeping track of all farm-related expenses and income, grants or funding received, tax paid, payroll and any other relevant tax information. Accurate financial records can make it easier for you to make large and small decisions for your farm, like deciding to expand or reduce stock, writing a business plan, or applying for a loan or grant. It also makes tax time a breeze and can even mean you get money back on your return — a definite plus.
In my experience farming is one of the few businesses where calculating a cost of production isn’t a given, which is unfortunate because if you want to make a profit and don’t know your cost of production or break-even price, it’s like you are trying to shoot a target blindfolded (see sidebar).
--Production
From a production standpoint, you will want to track information that will give a good overall picture of your poultry production. You should be tracking things like:
- Amount of feed purchased
- Feed quality (protein ratio)
- Hatching rates
- Fertility rates
- Pasture management
- Egg production
- Slaughter weights
- Breeding charts
- Cleaning/disinfecting dates
Keeping good financial records can also make it easier for you to determine a cost of production, something that is like gold to any business.
Breaking even
Calculating your break-even price is an important decision-making tool and is a good example of why record-keeping is important for farm management. To determine what you will need to break even you need to take your total costs, and divide by your yield in units, which will give you a per unit cost.
Total cost of production ÷ total yield in units = break even (per unit cost)
To calculate your cost of production (COP), you will need to keep careful records over a period of at least one year, then add up all your expenses, including fixed and variable costs; the total is your COP.
You will also need to calculate your total yield in units. With the example of laying hens, you calculate your total yield by using the following information: if you raised 100 layers and tracked both fixed and variable expenses over a period of three years (roughly a hen’s lifespan), and assumed an annual average of 25 dozen eggs per hen and an annual per hen total cost of approximately $33.33, the math would look like this:
Total Yield: # of hens X Dozens of eggs/hen/year X # of years = Total yield
100 X 25 X 3 = 7,500 dozen
Total Costs: # of hens X Total costs/hen/year X # of years = Total cost
100 X $33.33 X 3 = $10,000
To determine what you will need to break even you need to take your total costs ($10,000), and divide by total yield in units (7,500 dozen eggs), which will give you the amount of money you will need per unit (dozen eggs) produced to cover your costs.
$10,000 ÷ 7,500 = $1.33 (per unit cost)
With the example above, you would need to sell your eggs for at least $1.33 just to break even, not make a profit, and that cost doesn’t take into account the time involved in caring for and managing your hens. This kind of information is crucial to allow you to set realistic prices, or determine that if the market won’t support an increase in sale price maybe you don’t want to be in that market anymore.
There’s an app for that
If you’ve got the nerve to give up paper, there are apps that help with record keeping.
Gone is the stereotypical farmer clutching his little black financial record book, painstakingly writing out receipts for customers or recording how much each of his 100 broilers weighed at slaughter. Today’s farmers are a computer savvy lot, spending their spare time brushing up on social media marketing, and maybe even purchasing a square card reader for at-home or at-market sales. So why not take the next step and embrace software that will take a lot of the heavy lifting out of record keeping?
Not all software is suitable for small farm use, shop around for the best fit for your farm. Here are some good resources to explore:
--The Farm Toolbox: https://thefarmtoolbox.lyngsoesystems.com/tft.jsf
--Farm Credit Canada: https://www.fcc-fac.ca/en/tools-and-resources/fcc-management-software.html
--Farm Start: http://www.farmstart.ca/resources/
--AgExpert Analyst: https://www.fcc-fac.ca/en/tools-and-resources/fcc-management-software/agexpert-analyst.html
--Feather Central: http://bridgingintelligence.com/what-is-feathercentral/
--Farm Tool: http://www.wil-techsoftware.com/id21.htm
- Amy Hogue