Enterprise Budgets for Small Farms

Enterprise Budgets are both a physical and financial plan for raising and selling a crop or livestock enterprise. As a physical plan, enterprise budgets list types and quantities of production inputs and track crop yields. From a financial perspective, they also assign costs to inputs related to producing that crop and track revenue generated by each.

These enterprise budgets are economic budgets (rather than cash budgets) which incorporate both monetary costs and ‘perceived’ non-cash costs, or opportunity costs, into the expenses of raising any particular crop. Opportunity costs are essentially the cost of using a resource based on what it could have earned if it had been used for the next best alternative. For example, you buy a tractor for $10K, your opportunity cost would be the investment income that amount of money could have generated if you had purchased bonds with it instead. Or, your wages foregone by working on your own farm rather than earning an income working on a neighbour’s farm.

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Tags: Business Management