Not Just the Grain But Every Single Shilling Counts: Planning Resources to Plan Production

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By Samson Ssemanda

Although food availability has increased along with the growing human population over the last 30 years, there are still millions of people suffering from malnutrition. This problem is not only the result of insufficient food production and inadequate distribution, but also of the financial inability of the poor to purchase food of reasonable quality in adequate quantities to satisfy their needs.

Agriculture all over the world is shaped by how the millions of farmers manage the resources under their control to obtain maximum satisfaction from their decisions and actions. A lot of these decisions are determined by human, capital, and land resource combinations; technological possibilities; and social and political settings. Every farmer needs to employ the aspect of financial management in every decision they make for their business.

A farmer can use a number of financial tools to analyze, plan, and control his farm business. Among these, the simplest but yet most crucial are financial statements that will tell a farmer the amount of money he has invested in farm inputs, his outstanding debts, his equity in the business, and the degree to which his business is able to meet its financial obligations on time or its ability to pay all debts if the business is forced to discontinue.

Another tool that ought to be at hand is the profit and loss statementswhich will show the farmer his income sources and amounts, and also his operating expenses. A comparison of profit and loss statements over a period of years will tell the farmer which resources have been most profitable and whether there has been an advance or decline in his net income.

Lastly is the cash-flow statement which will show the farmer the sources of his funds and how they have been used over given periods of time during the year. The tool provides a useful check on the accuracy of the farm’s other business records.

Future agricultural progress depends greatly on improving the quality of management and the environment in which farmers make decisions. In addition to employing financial checks, farmers also need guidance and support in adjusting their decisions to the ever changing environment. For the case of low-income agricultural economies such as Uganda, progress will also needextension in research, improvement in input quality andtransport facilities, expansion of market opportunities, and a politically encouraging environment that allows for independent managerial choice and decision making by the farmer.