Every business has potential risks that can make it vulnerable to external factors. For a farm, this means having limited resources and unpredictable conditions. It is important to have key performance indicators so you can identify and tackle problems before they get out of hand. A farm audit is the process of evaluating an organization’s current performance and supplying insights on how it can be improved. A farm audit will help you analyse different aspects of your farm, such as finances, production processes, marketing channels, management systems, etc., and make recommendations on how to improve them. An effective farm management plan enables a farmer to establish objectives and track their progress over time. Creating a solid plan will also help reduce your risk of failure by alerting you to potential problems before they become unmanageable.
Decide on the most important aspects to audit
The first step in the audit process is to identify the aspects of your farm that you want to examine. This will help you focus on the most vital areas, so you don't get too overwhelmed by information.
Some aspects to consider include:
- Financial health - This will include your current financial situation, debts and potential investments and loans.
- Production - This includes your production goals, production capacity, and the required resources.
- Marketing - This will include your target customers and sales channels, your brand and product line, and your marketing strategy.
- Resources - This will include your available resources, human and technological resources, and your ability to manage risks.
Take note of current performance
After deciding on the aspects to audit, you will need to collect all available information about your farm. This will help you compare your performance against your goals and identify areas in which you can make improvements.
- Goals and budget - An important aspect of current performance is your goals and budget. This will help you decide the type of farm you want and the financial resources you need.
- Production and operational practices - Review your operational practices, including inputs, equipment and labour, and crop management. Take note of any changes, such as improved efficiency, so you can assess the impact of these changes on your farm’s performance.
- Customer demand and pricing - Investigate the demand for your products and the potential for increased profit and assess the pricing of your products. Also analyse your marketing efforts, including pricing, marketing channels, and product branding and packaging.
Identify key problems
After reviewing your current performance, you will be able to identify key problems in several areas. Problems can include over-production, low revenue, and low profitability.
- Overproduction - If your production exceeds your customer demand, you will need to find ways to reduce it, such as reducing inputs, changing to a different crop, or reducing production.
- Low revenue - If your revenue is too low, you will need to determine how to increase it by increasing your customer demand or changing your pricing.
- Low profitability - Low profitability is usually due to low revenue and high expenses. You will need to consider potential remedies, such as reducing costs, increasing revenue, or seeking financial assistance.
- Lack of resources and capacity - If you lack certain resources or have a limited capacity to manage risks, you will need to take steps to improve them.
Review your farm management plan
After you have identified potential problems and have taken note of your current performance, it is time to review your farm management plan. This will help you identify areas to improve and will also provide a roadmap to follow in order to solve your problems.
- Production - Look at production practices and decide on which ones can be improved. Decide on what inputs you will use, and which ones will be most effective.
- Management - Decide on how you will manage your employees and finances, and how you will monitor your performance.
- Marketing - Decide on your marketing strategies, including your product line, channel selection, and pricing.
- Risk management - Assess your risk management strategy and decide on which risks you will try to avoid and which ones you will accept.
- Conclusion - Finally, write down your conclusion and what you have learned from the audit.
Conclusion
An audit will help you look at your current performance and identify areas for improvement. Make sure to select aspects that are relevant to your farm, such as marketing and production, and that will provide enough information to make accurate recommendations. Analyse your current performance and identify problems that can be addressed through changes in practice, changes in policy, or changes in technology. You can then use these findings to create a roadmap for improvement.
