How to Properly Track Your Costs of Production?
In my last article, I wrote about the importance of keeping track of the costs of production in your coffee farm. Now I want to write about how to properly keep track of these costs so that at the end of the year you have better knowledge of the real costs of production of your farm and be able to make better decisions for the future of your coffee business.
3 Minutes Read
By: Luis Guillermo Cortes
Regional PECA Director
The first and most important rule for properly tracking the costs in a coffee farm is that you, as a coffee producer, must want to do it and have the will and the discipline to register all your costs on a daily basis, plus doing weekly summaries. You must be prepared to input all the daily activities of your coffee farm, such as the purchase of supplies, the kilos of coffee cherries picked, and parchment produced and sold. It is very important that all the data registered is true and accurate because the accuracy of the numbers is key to have correct final numbers. If the data is not faithful to reality, the decisions made based on these numbers will probably be wrong. All you need is a pen and a notebook where you can write this data.
When you include the cost of every worker paid for each labor done at the farm during the week, such as picking cherries, controlling weeds, fertilizing, pest and disease controls, post-harvest processing, or work related with lots under renovation, you must include the cost within its respective category. At the end, you must add all the costs and consolidate a weekly summary of expenses that will lead to a cost spreadsheet by week.
Below is an example on how to keep track of the costs of a coffee farm: During the first week of the year a coffee producer had the following payments:
- Purchases 20 bags of fertilizers to add to his lots under production for a value of 550 USD
- He pays 10 USD to transport the fertilizer from the store to the farm
- He pays his 10 workers 120 USD workers for cleaning with machete lots under renovation
- Harvests 500 kg of coffee cherry for which he paid 70 USD to the pickers
- Paid 24 USD to 2 workers who helped on the post-harvest process
- Paid the electricity receipt for 16 USD
- Sold 100 kg of parchment coffee to Caravela at 2.76 USD/kg
- The task of registering all the costs incurred for all activities done at the farm must be done every week until a whole year is over. At the end of the year, if all figures are correct, you will have a clearer picture of your productivity per hectare, as well as data of the total and real costs of your lots under production, the lots under renovation, as well as your administrative expenses.
When you divide your harvest costs by the number of kilos of dry parchment produced and sold to the market, you will know the cost of harvesting one kilogram of dry parchment coffee, and the same for each activity of the farm. With this data on-hand, you will be able to compare your data with that of other coffee producers in your region and know whether you are being efficient or not, as well as know the profit margin of your business, your productivity per area of unit, etc. But most importantly, you will be able to make better decisions regarding your farm’s future.
To facilitate the registration of the data of the costs of production in your farm in an easier way, we have developed a spreadsheet which you can download and print. You can use it to register in a weekly basis each expense and cost of your coffee business and learn about how to be a better coffee producer. We hope you find it useful!
“For the specialty coffee community to be able to taste the vibrancy of the finest Peruvian coffees, those coffees must be dried with a consistent drying rate at temperatures below 35 degrees Celsius.”
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