Reading your accounts: profit and loss and cash flow of a poultry farm, in units and percentages
A farmer knows how much he sold; a farm manager knows what he earned, where the money went and how much is left for tomorrow. Between the two stand two documents that many farms have never written: the profit and loss account, which says whether the year was a winning one, and the cash flow plan, which says whether the farm can pay for feed next week. Level 13 taught you to keep the cash box and level 15 to write a business plan; this lesson teaches you to read the whole farm as a business, in units and percentages, so that the method stays true whatever the price of the day. No amount is written here: yours will come from your own documents.
14 min read · 5-question quiz at the end
By Abdul Hussein ChoumanFounder of NEXTEKCI · Agnibilékrou hatchery since 2006This lesson is part of Farm manager: finance, growth, succession specialisation. It opens to every registered student, from free registration. Levels 1 to 5 and the tracks remain readable by everyone.
A farmer knows how much he sold; a farm manager knows what he earned, where the money went and how much is left for tomorrow. Between the two stand two documents that many farms have never written: the profit and loss account, which says whether the year was a winning one, and the cash flow plan, which says whether the farm can pay for feed next week. Level 13 taught you to keep the cash box and level 15 to write a business plan; this lesson teaches you to read the whole farm as a business, in units and percentages, so that the method stays true whatever the price of the day. No amount is written here: yours will come from your own documents.
- ✓Tell a revenue from a cash receipt and an expense from a cash payment, and explain why a profitable farm can run out of money
- ✓Build the profit and loss account of a poultry farm in units (100 units of turnover) and read each line as a percentage
- ✓Follow the cash flow of a flock week by week and calculate the money the farm has permanently advanced
- ✓Decide how to allocate the profit: reserve, loan repayment, the farm manager's own pay
- Two questions, two documents
- The profit and loss account of the three-house farm
- Cash flow: the same farm, seen from the cash box
- Four cases that separate profit from cash
- Reading your accounts in five minutes: the farm manager's ratios
- Going further
- •Revenue and expense (profit and loss) are not receipt and payment (cash flow); a profitable farm can run out of money, and it is the most frequent case.
- •Three-house farm, 18 flocks, 40,608 kg live weight per year: turnover 100 units; feed 62, chicks 13, labour 5, others 6, depreciation 3, interest 1; profit 10 units (10%).
- •A feed conversion ratio moving from 1.85 to 2.05 takes feed to 68.7 units and profit to 3.3%; an 8% price drop brings it to 2.2%.
- •A flock advances up to 4.38 units before the sale; with three staggered houses, the farm permanently has 8 to 10% of its turnover advanced: the working capital requirement.
- •Allocation of profit: 10 + 3 depreciation = 13 of capacity; − 4 of principal repaid − 5 of fixed remuneration = 4 units in reserve; the manager's pay is a fixed expense, not a leftover.