An enterprise is usually based on some production input unit an acre of land for most crop enterprise budgets, or an individual animal unit for livestock enterprise budgets. In some cases, two enterprises may be merged into one, such as grazing wheat pasture and growing wheat for harvest. Enterprise budgets estimate costs and returns based on a specific complement of machinery, land, labor and technology. It Starts with Good Records Cost and return estimates are projections for some future time period, such as the coming calendar year or crop year. Without good, historical production and financial records, developing enterprise budgets can be time consuming and frustrating.
Historical records are a useful starting point for estimating future costs.
Whether you have good records or not, you may be surprised at some of the costs you discover and budget for in your enterprise budgets, as well as the net returns above variable costs and above all costs. If you do not have the financial and production records necessary to develop an enterprise budget, you can begin by using budgets from other sources, such as the Texas Agricultural Extension Service, which can provide regional information for planning and decision making. If you use this method, you will need to adjust the budget to reflect your specific situation. As budgets are developed, costs are often categorized to make the information more useful to the decision maker. Costs are sometimes broken into two groups, referred to as variable and fixed costs, direct and indirect costs, or operating and overhead costs.