What is recurring capital?
Recurring capital expense is cost related to periodic outgoing for asset-related upkeep or expansion.
In other words, the capital assets you use to set up your farm either need:
- maintenance, or;
- modification
…for your business to keep up with making progress. Such periodic cost is recurring capital.
Understanding recurring capital
REcurring capital expense is money that is spent at junctures where it either becomes:
- unavoidable, or;
- prudent
…to spend now and save (or even make) later.
The money is extra to your regular business budgeting, but it was something you saw on the horizon.
You want to have the necessary money on hand to deal with it, with as little delay as possible.
This way you keep your investment plans on track with your poultry farm.
Example
Best practice
Here is a list of typical recurring capital expenses of a poultry farm.
- Buildings maintenance
- Vehicle maintenance
- Poultry house cleaning
- Staff training
- Website upgrade
Recurring capital expenses need to be on your financial management roadmap.
You need clear visibility of what they are and when they are coming up.
Their importance can be the difference between your business going undisturbed, or coming to a crashing stall.
It always pays to schedule them into your financial planning.