Finances can be the biggest stumbling block to your farm’s success. If you are like most people you are probably tempted to skip this lesson. Don’t do it! Stay and learn this stuff, you’ll thank us later
If you are farming as a hobby making money is probably not important to you, but if you are running a farming business, your primary goal is to make money.
Financing Your Farming
“Money is not everything but it enables everything.”
Here are a few of the ways you can raise money for starting your farm. You can learn more about financing your farm here.
Savings: use your savings and other forms of personal resources to finance your farm. If you have a day-job keep it and put money aside for your farming operation.
Family: your family is one of the first places you should go to for help with financing your farm. They already know, like and trust you.
Savings Group (Rounds): also known as rounds. Group savings (rounds) are good for pooling capital to use for getting your farm off the ground.
Bank Loan: To get a loan, banks will typically evaluate your credit application based on 3 Cs: capacity, collateral and character. Check the interest rates you are going to be pay before committing to a loan.
Mobile Money Loans: you can borrow using mobile money payments such as Ecocash Loans. Ecocash Loans are guaranteed loans which allow you to borrow based on your mobile money savings history.
Crowdfunding: platforms such as Kiva, Indiegogo and Go Fund Me allow you to raise money from the crowd.
Know your numbers
Proper management of your money is paramount to the success of your farming business.
1. Set up a separate account for your farming business: a good habit is to pay your business expenses using your business banking account. Check your bank statements regularly for any errors or overcharges.
2. Create a farm budget: prepare a farming budget for what you are looking to spend and make. You can adjust your budget as needed. Use your budget to help control spending and save for emergencies.
3. Keep track of sales ( the amount harvested, sales date, quantity sold, price per unit, the value of the sale, buyer), invoices (feed, seed, fertiliser, labour, utilities) and investments on the farm.
You can use a real shoebox or a tool such as Shoeboxed to enter and save your receipts.
Set Up Your Farm Finance Systems
Hire or find a freelance bookkeeper: if you can’t do your books yourself get some help from a bookkeeper. A bookkeeper can provide valuable support in keeping your books up to date on a weekly/monthly basis.
Use a simple accounting system such as Quickbooks, Xero, Wave Accounting: these are handy tools that can help you to manage and organise your finances (such payroll, livestock sales, crop sales, fuel, seed, fertiliser and calculating your cash flow).
Use a paper notebook: a good old-fashioned notebook works just fine for record keeping your purchases and sales. The key is to keep it simple so that you actually use it. Remember to keep your notebook safe and dry.
Filing system: Use a filing system to file the invoices you receive into either paid and unpaid sections.
Set up a Payroll: if you have employees you need to keep track of their salaries and any payroll taxes.
Payments options: make it easy to get paid by accepting credit card (swipe terminal) and/or mobile payments.
Company Formation: Set up a legal entity and get your Certificate of Incorporation. Get your tax clearance certificate especially if you plan to sell to retailers.
Farm Budget: prepare a sound, realistic budget. Keep it as a living document and update it regularly. The budget will help you define where you want to go and how you will get there.
Set goals: set some goals about how much you want to make.
Prepare Financial Statements:
Profit & Loss Statement: tracks your revenue and expenses which are vital to the growth of your farming business.
Balance Sheet Report shows your cash balances, land and equipment costs, depreciation and debts owed. Update it monthly.
Income Statement tells you where your money came from and where it went on a monthly basis. Your revenue goes at the top, expenses in the middle and pre-tax profit at the bottom.
Cash-Flow Statement: tracks how much income you received and how much you spent on a monthly basis. Tracking your cash-flow is essential for knowing if you will have enough money to pay your bills. Review your cash flow regularly to stop your farm from running out of cash.
Keeping up to date records will help with tracking your performance, planning and evaluating your profitability.
Your financial statements can also help you with getting additional financing to scale up your farm operation from funding programs such as the Create Fund.
Avoid taking on unnecessary debt, only borrow what you will need to grow your business and provide a return on your investment (make you money).
Solve Your Cash-Flow Problems
Keep your overhead low: Keep your overhead low especially when you are starting out. Overhead helps you operate your business. Fixed expenses include things such as equipment, worker salaries, other payroll costs, dues and insurance; variable expenses: advertising and transportation costs, these vary from month to month.
Improve your sales: try to sell more of your produce for better prices.
Get paid on time: get paid for what you sell and in good time.
The Road Ahead: In Lesson #5, you will learn how to market what you grow/farm.
Eleanor & Kundai
Emerging Farmer
Zambia Farmers hub 