Turf Hyrdomulcher
.
.
.
.
.
.
.
.
.
.
The Importance of Keeping Overheads Down
One of the most important ways a business can improve its profitability is to maintain low overhead costs. This is particularly important in Australia where it has been well proven that a farmer with a low overhead cost structure will produce a higher net farm income with the same gross margin than a farm with high overheads.
With most farms there is a minimum level of overhead costs required to sustain the business and a minimum of personal costs needed for living. Consequently these costs must be met irrespective of the level of output.
Turf Aervator for Aeration & Cultivation
For instance, the same accounting fees, advertising, and administration costs will be incurred whether the farm is 8ha or 20ha.
There are a number of ways the existing overhead cost structure can be spread over a greater level of enterprise.
The main overheads that impact on the farm business tend to be labour, energy -(electricity, fuel), and machinery costs. It is therefore essential that the level of plant is kept to a minimum and that labour is used most efficiently. We are therefore looking for an optimum level of investment in labour and machinery. Often the strategic use of casual labour and/or contractors can save on overheads.
Some ways to maintain low overheads include:
- Increase turf production per hectare by increasing the number of harvests per year;
- Increase farm size by buying, leasing or share farming more land;
- Reducing machinery overheads;
- Minimise labour input by using casual labour, finding part time work off farm; and designing the farm for ease of management; and
- Increase water efficiency on the farm. Recent research on over watering has demonstrated leaching of nutrients hence ‘washing away the profits’.
Monitoring costs requires a good recording system. But before you do this it is essential that you determine your annual and monthly income and expense targets in line with business objectives and use budgets to monitor and manage expenses and income. Talk with your accountant about the best way to set up a financial recording system that will account for all costs and enable monthly reports on income and costs.
