In order to evaluate accurately, you need information. In the busy season, you are too busy to set up a record keeping system. Now is the perfect time to decide what information you need and how you will gather it. As you evaluate and plan, think about what you recorded and what is missing. Make a list of records you want to keep and decide on techniques you will use to collect that data over the next season.
Here are some records that are essential in evaluating farm profitability and some ideas on how to keep them.
Expenses need to be categorized to evaluate the profitability of specific crops or enterprises. When setting up categories you will need to know if an expense is an overhead cost or a direct cost.
Overhead Costs are costs that occur roughly at the same level regardless of how much is produced (insurance, utilities, fuel, etc.).
Direct Costs are costs that change as units of production change (seed, fertilizer, packaging material, etc.).
To evaluate a specific crop, you will need to know all the costs associated with that crop. Accounting software such as QuickBooks is useful in tracking expenses. Decide this winter what your expense categories will be and what crops you want to watch/track closely.
Income should also be categorized. How will you know if potatoes are profitable unless you separate them out from your other crops? Market load lists and invoices are excellent tools for keeping track of income per crop. Require your employees (and yourself!) to keep accurate load lists.
Marketable Yield per bed/acre is an important record to keep. Your crop profitability can vary dramatically depending on yield. Decide how you will track yield. Where will you record this data?
Units Sold is different than income or yield and should also be tracked. Yield is what you produced, it may not all be sold. The actual units sold are key in evaluating demand for a product. Units sold can be tracked on your load lists and invoices.
Time/Labor is probably the most challenging record to keep. Especially owner time. Develop a strategy for how you will track your labor. Here are two ideas for tracking time. For employees, try the method used by TD Willey Farms. They use a weekly time card format where the employees write down the time they begin each new task. You can do this as an owner as well! A second idea suggested by a local farmer is to keep a planner, notebook, or electronic device and place it at the dinner table. You aren't allowed to eat until you have filled out what you did that day, including how long you spent doing it!
You can get labor estimates by sampling - where you time how long it takes to do a portion of a task. For example, how long does it take to prune one tree, then use that number to calculate how long it takes per row or acre. If you use time sampling, be sure you consider changing conditions over the season (e.g. the second or third harvest off a bed or tree). Consider time sampling several times during the season to get a more accurate average.
Remember who is doing the work. If you usually have employees move electric fencing, then you should time them doing it. If you time yourself, you may get a faster time but it won't help you in an honest evaluation of the cost of production.
Land or total acreage should be identified. Know how many trees per acre or bed feet per crop. For livestock, how much pasture and its carrying capacity. To make this simple and to help with crop planning, make a map of your fields. Unless you majored in cartography, these maps do not need to be works of art. A simple hand-drawn map works well. Use the map as a template and make copies before you fill in data that may change. On your copies, write planting dates, harvest & yield notes, amendments made, and any other records needed to evaluate your crops.
Enjoy the rainy day and the opportunity to build your business by developing a record keeping system. Don't forget to pat yourself on the back for how much you accomplished!
More on Record Keeping:
UCCE Farm Profitability Calculators: http://ucanr.edu/sites/placernevadasmallfarms/Farm_Business_Planning-_new_2/FBP_Farm_Economics/
Keeping Good Records, Cornell University: http://www.nebeginningfarmers.org/farmers/achieving-profitability/profitability-tutorial/managing-your-finances/
How to Finance a Small Farm:http://sfp.ucdavis.edu/pubs/Family_Farm_Series/Farmmanage/finance/
Harvesting Data, Foothill Farming: http://ucanr.edu/sites/placernevadasmallfarms/blog/?blogpost=21985&blogasset=24945
Farm Records, ATTRA: https://attra.ncat.org/intern_handbook/farm_records.html
Financial Records, ATTRA: https://attra.ncat.org/intern_handbook/financial.html