KPIs + Gross Margins
An Agricultural Business generates and lot of data that we can measure, but which measures are useful and how can they be used to help make business improvements?
Key Performance Indicators – KPIs
Some of the data we can record and measure is more useful than others. These key measures or “Key Performance Indicators” – KPIs help monitor a business’s performance as part of routine monitoring.
The most important KPI for any business relates to financial performance, specifically the cost of production of its output.
Read more on KPIs on AHDB website – go to site
Gross Margins
Gross margins are often misunderstood and more often than not misused! Every enterprise on the farm should have a gross margin produced. Gross margins have become an integral part of farm business management because it simplifies the vast array of farm sizes and types into a unit of production basis. It makes managing and forecasting simpler. You can work out the efficiency of an enterprise by changing the figures such as size of the enterprise and output.
Read digest then test your knowledge – Go to knowledge check
Fixed and Variable Costs
All costs within the farming system can be divided into 2 distinct groups. Which are Variable costs and fixed costs. A gross margin will only use the variable costs specific to that enterprise. This is why it doesn’t show the overall profitability of the farm. Some argue that the use of gross margins can make it harder to gauge the impact of dropping an individual enterprise, my view is that gross margins are a very useful way of seeing a break down of cost of production for each enterprise and can be useful to see where costs can be cut and efficiencies made
Fixed Costs
Typical Fixed Costs
