Diary of a Poultry Farmer: My first step in keeping books of account

Children feed chicken in Elburgon, Nakuru County. Keeping accounting records in poultry farming is key in ensuring productivity. PHOTO | JOHN NJOROGE | NATION MEDIA GROUP

What you need to know:

  • The way I’d organised my financial records, I could easily tell whether I made a profit or loss, so I thought, by simply subtracting sales from expenses like chicken feeds and dog food, drugs and vaccines, wages, water, transport, sawdust, charcoal, construction materials and miscellaneous items.
  • Caleb made me understand why my ‘accounts’ needed to be understood by ‘others’. “Besides helping management to track expenses, books of account can be used to seek grants or loans from banks and to make tax returns,” he observed.
  • Honestly, I’d never heard the term ‘vote heads’ before but after two hours of being with Caleb, it was rolling from my tongue like a lullaby.
  • After a lot of back and forth, we came up with 10 vote heads: chicken feeds, disease control, brooding costs, salaries and wages, protective gear, rent and rates, electricity and water, transport and fuel, consumables, and construction costs.

Two weeks ago, I hired a new farm manager with a background in accounting, and as you’d guess, the first thing he wanted to see were my ‘books of accounts’.

I handed him a bunch of exercise books in which the former manager, Cleophas, recorded his expenses like feeds, vaccines, drugs, dog food, farm equipment, sawdust, washing detergents and construction materials.

After adjusting his reading glasses the way some professors do, Caleb started perusing through the pages. Barely five minutes later, he stared at me as if to say, ‘you must be nuts’. Instead, he said politely, “What you have here is raw data that needs to be processed further to be understood by others.”

The way I’d organised my financial records, I could easily tell whether I made a profit or loss, so I thought, by simply subtracting sales from expenses like chicken feeds and dog food, drugs and vaccines, wages, water, transport, sawdust, charcoal, construction materials and miscellaneous items.

I’d also asked Cleophas to stick all the receipts inside an exercise book although I’d noticed that many were piled up in a box.

Some receipts had faded while more were missing. I’d also tried to keep a record of sales but sometimes a customer would buy chicken in cash and I’d use the same money to buy feeds without recording.

You think it’s easy? How does one account for, in financial terms, the instance where you lose 72 per cent (594) of your flock to diseases after spending a fortune feeding them as was my case sometime last year?

Caleb made me understand why my ‘accounts’ needed to be understood by ‘others’. “Besides helping management to track expenses, books of account can be used to seek grants or loans from banks and to make tax returns,” he observed.

CHALLENGES RELATED TO ANIMAL HUSBANDRY

For sure, I started farming as a hobby and the last thing on my mind was going through the pains of setting up an accounting system.

Instead, I focused on challenges related to animal husbandry such as disease control, market outlets, start-up capital, housing structures, reliable workers and vets to help.

My reasoning was that if I overcome challenges related to animal husbandry, production would improve and with time, my business would start making a profit.

I would then employ more workers and hire a full-time accountant to do the ‘dirty work’.

In fact, sometime last year, I tried to hire a part-time accountant to help organise the ‘accounts’ but his consulting fee was way too high for my struggling enterprise.

Now, according to Caleb, even if I’m not making a profit, I still need a system to help me track my transactions (expenses or sales) from the time they happen to their completion.

At first, this didn’t make sense until he pulled out a petty cash voucher from his bag to show me how it works.

Looking back at my records, he explained the first challenge. “I’ve a problem with what you refer to as miscellaneous,” he paused. “You need to sort your expenses into standard accounting categories,” he added.

Honestly, I’d never heard the term ‘vote heads’ before but after two hours of being with Caleb, it was rolling from my tongue like a lullaby.

CONSUMABLES

He explained that items that are used often and ‘discarded’ such as bulbs, soap, saw dust, detergents and pens should be listed as ‘consumables’ to distinguish them from items like buildings and farm equipment that can last for more than one year.

He explained that ‘consumables’ are usually deducted from the income when one is making the profit and loss account.

I then asked if feeds can also be classified as ‘consumables’ and he said these should belong to a different category.

After a lot of back and forth, we came up with 10 vote heads: chicken feeds, disease control, brooding costs, salaries and wages, protective gear, rent and rates, electricity and water, transport and fuel, consumables, and construction costs.

The next step was to transfer the vote heads in the exercise books into the petty cash voucher by date of purchase.

Okay, I know you’re probably lost as I was but I promise that in the coming weeks, I’ll take you through the steps of turning raw financial data into the petty cash book, the cash book, the general ledger and finally the trial balance statement.

Keep reading.