Business Management for small-scale agro-processors

AGSF Working Document

7

Business management for small-scale agro-processors

Agricultural Mangement, Marketing and Finance Service (AGSF) Agricultural Support Systems Division FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome, 2005

Business management for small-scale agro-processors

AGSF Working Document

7

Peter Fellows and Alexandra Rottger

Agricultural Mangement, Marketing and Finance Service (AGSF) Agricultural Support Systems Division FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome, 2005

Business management for small- scale agro-processors

iii

Preface

This booklet addresses micro- and small-scale entrepreneurs who wish to improve their business operations. It may not require the sophisticated business management techniques that are used by large-scale manufacturers, but simple procedures to plan, monitor and control production, finances, inventories, quality and staff matters. Some types of agroprocessing have specific problems or issues that are described in the last chapter. The booklet aims to provide practical advice and information on management aspects to help entrepreneurs or potential investors at micro- and small-scales to run a sustainable agroprocessing business. It may be a useful addition to training resources for local and international NGOs, or staff at government institutions who work with small enterprises. Policy makers or students on business, agriculture and food-related courses may also find the booklet useful.

iv

Business management for small scale agro-processors

Contents

Preface

iii

Acknowledgements

v

Figures

vi

Tables

vii

Glossary

viii

1 Introduction

1

2 Planning production

3

3 Managing finance

23

4 Inventory management

41

5 Managing people

47

6 Managing equipment

53

7 Managing quality

58

8 Sector specific guidelines for business management

Edible oil extraction

63

Fruit and vegetable processing

67

Cereal milling

69

Meat and dairy processing

71

References and further reading

73

Acknowledgements

v

Acknowledgements

We would like to thank Fran?ois Mazaud for the original idea of producing a business management guide for small-scale processors. A special thanks to Tim Chamen for editing and Peter Roehr-Rouendaal for the illustrations and Carlos da Silva for revising and commenting on the final draft.

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Business management for small-scale agro-processors

Figures

Figure 1: Figure 2:

Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21:

Use of a process chart to calculate the equipment needs Activity chart used to plan job allocations for staff in a fruit processing enterprise Production process for making chutney Example of a page from an invoice book Example of a page from a receipt book Example of a page from a cashbook Example of a sales record Example of a page from an order book Example of a page from an expenditure book Example of balance sheet Example of a cash flow statement Break-even analysis The supply chain Pareto curve showing value and number of items in a storeroom Layout of storeroom and processing room Example of a bin card Example of a person profile used in recruitment of new staff Example of a spares record Maintenance and repair records Example of a quality assurance record Process chart showing potential hazards and CCPs in sauce production

Tables

vii

Tables

Table 1: Table 2: Table 3: Table 4: Table 5: Table 6:

Table 7:

Calculation of ingredients needed to make 50 kg of tomato sauce Typical losses during food processing Storage times for different crops and animal products Processes producing polluting effluents Different categories of stock in an ABC analysis Different categories of stock in an ABC analysis shown as accumulating percentages Example of planned maintenance in a flourmill

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Business management for small-scale agro-processors

Glossary

Bottleneck

Break-even point Budgeting

Cash flow Cold chain

Competitor

Consumer

Creditors Customer Debtors Demand Depreciation

Distribution channel

Diversification

Efficiency

Equity finance Feasibility Study

Fixed costs

Interviewing

Inventory

Investment Invoice Ledger Limited liability

Loan financing

A hold-up caused when one part of a process is slower than others, one piece of equipment is smaller than the others, or there are too few staff working in a particular part of a process. The level of production at which all costs are covered. Planning for the amount of money to be spent on a particular activity or item. The record of monies received and paid by the company. A system that maintains a food at the correct temperature from production to consumption. Another business selling similar types of products to the same target customers. The person or household who is the final buyer of a product. People who are owed money by a business. A person, firm or institution who buys a product. People who owe money to a business. The amount of goods that customers want or need to buy. Decrease of value of capital equipment due to wear and tear and the passage of time. The people or organizations through which products are handled and moved between a producer and a consumer. Expanding a business range by developing new products or new markets. A measure of the amount of production from a certain level of inputs. Money put into a business by the owner. Systematic investigation of an idea for a new product or process to see if it can work ? i.e. to see if it is feasible. Costs of production that do not vary with the amount of goods produced. A structured way of finding out information about a person or a product. Amount of inputs, unfinished and finished products at a given time. Putting money, fixed and current assets into a business. A bill requesting payment. A record containing the summary of financial information. In a company that has shareholders, their liability is limited to the amount of money they have invested in shares. Borrowing money for a business.

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