By Brian Ravencraft
What are KPIs and how can they help you run a successful agribusiness? KPI stands for Key Performance Indicator. These are measures that are both financial and non-financial in nature that help you measure the overall health of your operation. Of course, the types of KPIs you put in place will vary from industry to industry, but in farming, we usually look at these top ones with our clients.
Here, we are looking to really measure and understand the financial health and capabilities of your business. For example, we will look at your available assets, measure profitability by taking a look at your ability to generate revenue, your ability to and how you pay for all of your financial obligations during your fiscal year, etc. We will also use this KPI to take a look at growth opportunities. If we find that one area of the operation is bringing in more profit than others, we will talk about ways to build upon this.
Inventory and productivity
Let’s take a look at what is leaving and coming into the farm. From waste percentage to monthly stock usage, to estimated production potential, chemicals per output, yield per acre, and fertilizer use, this KPI covers many bases and provides useful information.
Administration and personnel
This KPI studies the people within the operation and their efficiency. Is also covers administrative items such as total plant numbers, field utilization rates, mechanization utilization and more.
Once the KPI exercise is complete, we work with our clients to see how the actual results match up with their business plan, strategies, and goals. Sometimes you find you are hitting the mark. Sometimes you get the information you need to stop missing it. Using KPIs will give you the knowledge you need to see both problems and opportunities and address them accordingly. They will allow you to better utilize your business plan. They will aide you in achieving real success. Ideally, you would monitor these KPIs on a monthly basis. However, this timeline may vary due to the nature of your operation.
If you aren’t using KPIs and would like more information, please reach out to us for assistance. We have been helping those in agribusiness for over 102 years and we are ready to help you be successful!
Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.agribusinessaccounting.com or www.HolbrookManter.com.