2.9. Record keeping

2.9.1. Financial and sales records
2.9.2. Production records

There are three sets of basic records that should be kept by the owner of a small fruit and vegetable processing unit: financial records, those that relate to the production of the products and sales records. The uses of these records are inter-related and are described in more detail in Sections 2.3 and 2.7. In this Section, the format of the records and the likely ways in which information will be obtained are summarised.

As with all other inputs to a business, keeping records is an investment of time and money and the benefits must outweigh the costs. There is no point in recording information for its own sake and records must be used if they are to have any value. This means that the owner or manager must understand why the information is collected and what it can be used for. Similarly, the time and effort spent in keeping records must be related to the scale and profitability of the business. While it is true that some successful entrepreneurs keep all of the information in their head and do not keep records, no-one else can help run the business during times of illness or absence. Some examples of the value and costs of keeping records are shown below:

Value of record keeping:

· detailed knowledge about the operation of the business
· identification of trends
· accurate control over finances and product quality
· identification of individual costs to allow changes to a product or process to optimise profits
· keeping track of money owed to the business
· evidence for tax authorities (may be a legal requirement)
· factual basis for product pricing or salary levels
· knowledge and avoidance of theft.

Costs of record keeping:

· time spent learning how to keep records or training staff time spent writing them

· cost of materials such as ledgers and pens

· information is written down and therefore potentially available for competitors or authorities to see

· cost of keeping records private and secure.

Accurate information is essential and this means that staff who are required to collect information should know its value and why it is being collected. This should be part of the induction and training when new staff learn their job. The entrepreneur should employ people who have the skills and aptitude to do the work, but should also put in place a system of checks to ensure that one person does not have responsibility for a whole area of business activity. For example the person responsible for keeping records of purchases should be different from the person who records use of materials or levels of stocks. The owner or manager should also ensure that all records are kept up to date and where appropriate, the arithmetic is checked for accuracy. There is no single correct way to keep records and individual owners should devise systems that suit their way of working. The examples given below have been found to be successful in small food processing enterprises in Africa and Asia.

2.9.1. Financial and sales records

A separate record of the cash that comes into a business and the cash that is used to buy daily items is usefully prepared using a Cash Book (Figure 62). Additionally, when entrepreneurs have a bank account, they will require a Bank Book to record cheques that have been received and paid, using the same headings as those shown in Figure 62.

Figure 62. - Example of a Cash Book layout

Date	Item	Cash in	Cash out	Balance
____	Description or invoice number	______	________	_______
____	________________________	______	________	_______
____	________________________	______	________	_______

It is important to know how much money the business is owed by debtors at any given time but also how much is owed to creditors. This is particularly important if for example, retailers expect a period of credit before they pay for goods received. The amount of money owed by an enterprise and the amount owing to it can be combined in a single ledger so that a weekly comparison of the difference can be made. Invoices and receipts should be kept together in date order. An example of this type of ledger is an Accounts Receivable and Payable Book (Figure 63).

Figure 63. - Example of an Accounts Receivable and Payable Book

Date	Item	Credit given	Balance	Date	Item	Credit taken	Balance
____	Description or receipt number	______	Description or invoice number	_____	_____	___________	______
____	______________	______	____________	_____	_____	___________	______
____	______________	______	____________	_____	_____	___________	______
____	______________	______	____________	_____	_____	___________	______

Other books can be used but these are the basic requirement for collecting all financial information needed to prepare monthly profit and loss statements, balance sheets and to check cashflow forecasts. The other information needed to prepare profit and loss statements are records of sales and stock in the storerooms (Figures 64 and 65).

Figure 64. - Example of a page from a Sales Book

Product Name ________________________________			Batch Number _____________
Date	Customer	Amount Sold	Value	Invoice Date	Payment Date
____________	Write in amount in kg or number of packs	___________	________	______	_______
____________	_________________	___________	________	______	_______
____________	_________________	___________	________	______	_______
____________	_________________	___________	________	______	_______

Records that are kept by storekeepers show which products and materials are transferred into and out of the store-rooms. The balance is used to indicate when reordering is needed and can also be used to highlight pilferage or other losses that are not accounted for.

Figure 65. - Example of a Storekeeper's Book to keep account of ingredients (similar entries are made for packaging, materials and finished products)

Ingredient name ______________________________________________________________
Date	Amount to store	Amount from store	Process batch number	Balance
_____________	Write amounts in kg or number of packs		__________________	_______
_____________	_____________	________________	__________________	_______
_____________	_____________	________________	__________________	_______
_____________	_____________	________________	__________________	_______

As shown in Figure 66, data from the sales book is totalled to give monthly income. The costs of ingredients, packaging etc., that were used during the month are recorded in the storekeeper's book and other expenses are totalled from the cash book and bank book to calculate the monthly Profit and Loss Account.

The Profit and Loss Account describes how money comes into and leaves a business over a month (or other suitable period of time). This allows the owner to plot the progress of the business and compare the results to those expected in the Business Plan (Section 2.3.4).

However, to obtain a 'snapshot' of the performance of the business at a given moment, a balance sheet is a strong management tool which can help to understand where money came from, how it is used in a business and how it could be better used. An example of a balance sheet from a small wine-making business is shown in Figure 67.

Figure 66. - Example of a monthly Profit and Loss Account

Month: April
Item		$	$
Income from sales			750	from Sales Book
Less costs
	Opening stocks	25
	Purchases	55
	Stocks at end of month	30
	= Stocks used during month	50		from Storeroom Ledger
Gross profit			700
Less other expenses:
	Salaries	75
	Rent	25
	Supplies	20		from cash and bank books
	Transport	45
	Marketing costs	25
	Interest repaid to lender	18
	Taxes paid	6
		214
Net profit			486

The balance sheet is therefore a statement about the money in a business at a particular time, which shows how the money is being used (the assets) and where it came from (the liabilities). In the above example, the money that remains in the business as unclaimed profits is a main source of working capital. It is important to note that the owner has already taken a salary from the business and that the remaining profit belongs to the business to be used for reinvestment. This picture of the business can be used to determine, for example, whether more stock should be ordered, whether unpaid invoices to retailers should be followed up urgently or whether there are sufficient profits to repay a larger amount from the loan.

Figure 67. - Example of a balance sheet for a small wine-maker on 21.3.1997

Where money came from (Liabilities) ($)		How the money was used (Assets) ($)
Accounts payable	450	Cash	65
Customer payments	865	Accounts receivable	650
Bank loan	1200	Stocks	600
Owner's capital	500	Equipment	2180
Profits	880	Owner's salary	400
	3895		3895

2.9.2. Production records

The main reasons for production records are to ensure that quality assurance procedures are in place and operating satisfactorily and to record the use of ingredients and amounts of stock for use in financial accounting. When raw materials are processed, each batch should be recorded in an Incoming Materials Test Book (Figure 68). The same layout can be used for recording incoming batches of ingredients and packaging materials, some of which also require inspection on arrival (see Section 2.7.2).

Records should also be kept of the amount and type of raw materials and ingredients that are used and the important processing conditions (e.g. drying times, heating times and temperatures etc.) to ensure that operators mix together the same ingredients in every batch and process them in the same way each time (Figure 69).

Each batch of food should be given a Batch Number which is recorded in stock control books, processing logbooks and product sales records. The batch numbers should be correlated with the product code numbers that are printed on labels or outer cartons. This allows the processor to trace any subsequent faults in a batch of product back to the process or to the raw materials.

Figure 68. - Example of an Incoming Materials Test Book

Product Name ____________________			Batch Number ____________
Raw material*	Supplier	Results of inspection for**:
		A	B	C
Write in either 'Pass/Fail' or observations on quality
____________	______	__________	____________	_________
____________	______	__________	____________	_________
____________	______	__________	____________	_________

* This information should also be recorded for other ingredients and packaging materials
** Different tests are written in place of ABC according to the types of materials being inspected

Figure 69. - Example of a Process Logbook for jam production

Product ___________________________		Batch Number __________________
Ingredients:	Target	Check	Changes from target
Pulp	Write in amounts, times etc.		_________________
Sugar	__________	__________	_________________
Citric Acid	__________	__________	_________________
Pectin	__________	__________	_________________
Batch weight	__________	__________	_________________
Boiling time	__________	__________	_________________
Solids content of product	__________	__________	_________________

In summary, therefore, record keeping is a management tool to help the owner to know the state of a small fruit and vegetable enterprise at any time and to have reliable information on which to base his or her plans for development of the business.