prepare a Business Plan

It allows a manager to test on paper the viability of a proposed plan, before committing it to action. As has been said, "if it doesn't work on paper, it won't work in the field!" It allows the manager to make modifications and fine-tune a plan, in order to increase revenue and/or reduce costs. It necessitates giving careful thought to the key management responsibilities such as longer range goals.and objectives, human resources, production, marketing, finance, profitability and risk issues.

It allows management to forecast credit requirements, timing and the need for capital purchases, production alternatives and structural changes over the planning period.Most farm managers understand the importance of good records. This is especially true in times of tight profit margins. Most producers do a good job of keeping records for income tax purposes. These records may, however, not contain sufficient information, which will allow for a complete business analysis.

The weak link in the record-keeping chain often relates to the failure to record non-cash information such as inventories, physical information such as feed consumption, keeping track of payables, receivables, and credit and loan balances. Completing a year-end inventory is necessary for any meaningful business analysis. Farm business managers
must get into the habit of taking inventories at the end of each year. Non-farm businesses understand the need for taking inventory, not because they enjoy the task but, simply put, Revenue Canada does not allow them to file income tax on a cash basis without regard to inventory adjustments. Never the less, having inventory information is important for a number of non-tax reasons including business analysis and participation in agriculture programs such as AIDA.

Good farm records are also of great value when it comes time to prepare a farm business plan. Historical records, both physical and financial, provide a foundation for the business plan, and give the projected plan credibility in that the past results are consistent with the present situation and future expectations. A business plan builds on the past experience and projects forward the planned business activity. Having the projected results consistent with the past experience gives the business plan a higher degree of certainty and a better chance of success. In cases where there are no historical records, such as a new enterprise or new business, projections.