Get your farm financially fit with Teagasc
These days many farmers are concerned about caring for young stock, paying feed and fertiliser bills, weather conditions and grass growth etc. However, family comes first. Aim to get your farm financially fit to meet domestic bills.
Have a plan to deal with paperwork, both farming and domestic. The key point here is to have a fixed point where all paperwork is assembled and organised. A suggestion is to nominate a senior member of the household to deal with paperwork on a certain day. Domestic bills can be placed in a separate box. These domestic bills should be paid by off farm income.
Likewise, farm bills should be paid by farm income and kept separate. Useful office equipment will include a stapler to keep documents together, a filing tray or file box and a filing cabinet to store documents. All members of the household need to understand what is involved in this system.
Establishing a simple filing system will help determine household and farm cash flow, while prioritising bills to be paid first. Computer software packages are available to assist in determining weekly and monthly cash flow.
Consider having separate household and farm accounts. Lodge non-farm sources of income, such as wages from off-farm work or state payments, in the Household/Personal Account. Use this account to pay all household bills and personal expenses for family members.
Many families use a credit card to pay all household bills such as the weekly grocery shop or even major household purchases. The monthly credit card statement helps keep track of where the money was spent.
Use a separate farm account to manage all income and expenses from farming. A regular (usually monthly) bank standing order can be used to transfer money from the farm account to top up the household account. Financially fit families use online banking to monitor their accounts and often one member of the family is nominated to pay bills using online bank transfers as required.
Establishing separate accounts can help farmers determine what their farm is making at any one time. It can help control costs and pinpoint areas to improve management. Financially fit farm households should be able to prioritise whether farm expenses or domestic bills come first.
Sources of information
Many farm families gather financial information from media and Teagasc technical newsletters. Public meetings and trade shows also offer valuable information on products or services which might improve the profitability of farm businesses
Discussion groups can also be a good source of information. As stated above, many families are now frequent users of the internet. Various banking sites and information websites will provide a wealth of information on the banking services available. Teagasc has its own tools for this purpose – more information on these can be found from on Teagasc.ie
Long-Term Cash Flow
Have a long term plan for cash flow. When it comes to significant decisions such as a major farm or house spending project which is going to be funded either by savings or debt, prepare an overall net cash flow projection for at least five years. This should set out the impact of the proposal on overall cash flow taking into account both the farm business and the farm household’s requirements for cash.
As part of the process be sure to estimate and include any projected increase in demands for cash from the household due to life events such as college starters, weddings etc. All family members can highlight the areas to be included here.
By adopting this approach it is less likely that a conflict between spending on the farm or spending in the house will arise. The bottom line is that family comes first. Ensure that your farm is financially fit to meet all future domestic bills.
Teagasc, supported by stakeholder organisations, invite you to a ‘Get Farm Financially Fit Seminar’ to discuss financial planning for every stage of your life.
Topics to be covered will include:
- Farm Household Planning & Budgeting
- Dealing with income fluctuations
- Planning for Education
- Agri-Taxation Review
- The Financial Toolkit
By Anthony O’Connor, Teagasc Adviser, Galway/Clare Regional Unit