Budget Limitations

Although "best estimates" should be used to develop budgets for use in farm business analysis, it is important to remember that projections are influenced by production and price uncertainty. Such variability creates risk to the operator and puts pressure on the reliability of the estimates used in the enterprise budgets. Everything doesn't proceed just like you planned it. Even under careful use, errors can compound themselves to the point where budgets can have little or no value. This element of risk should be considered and evaluated by the manager when determining the solutions that best meet the goals and objectives of the farm family. Successful farm managers adjust their numbers throughout the year at regular intervals by comparing actual outcomes versus planned. This internal evaluation will help identify existing or potential problems and will result in fewer unpleasant surprises.

Budget preparation is time consuming, but it can pay major dividends. It requires pencil and calculator activity as well as searching data sources for information to be used in preparing the budget. Software is also available to assist in budget calculations. Not only is it important to work hard, but also to work smart.

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