Money matters for your business

The View from Northern Ireland: There is quite definitely something off putting about the subject of farm finance.

Even though farmers or managers realise its importance, it is an aspect of farm management that many shy away from. Farmers are not unique in this respect and a farmer once said to me when asked why he participated in an annual benchmarking exercise that “whether I like it or not, once a year I have to sit down and discuss what I might otherwise avoid”. Furthermore, accurate figures sometimes present a cold and unpalatable truth – and who wants to come face to face with that.

Too often for instance it seems that “tax planning” boils down to statements such as “you look like making a profit this year, what about replacing a tractor”? But to answer these questions you need to understand the difference between cash and profit.

What some farmers fail to realise is that their annual tax account is quite different from a business management account and that together with a cash flow budget the management account forms the bedrock of successful business management.

The past five years have seen an unprecedented rise in the main input costs of fuel, fertiliser, chemicals and feedstuff. This together with shorter credit terms being offered by many suppliers has been a large consumer of any cash surplus on many farms. In addition, the dreadful weather conditions of 2011 and 2012 have left a legacy of increased overdrafts and reduced cash flow that has had a negative impact on the liquidity (availability of cash to pay immediate bills) of most farming businesses.

Understanding the dynamics of the farm business in terms of both profitability and ability to generate cash is now more important than ever. It is an area of understanding that progressive farm businesses need to focus on in order to maintain business competitiveness and be sustainable.

In order to address some of main principles of farm business management accounts and to give farmers a clearer understanding of the importance of farm financial planning a series of seminars have been planned for each county in Northern Ireland. The seminars will be delivered jointly by one of three banks (Danske Bank, Ulster Bank, Bank of Ireland) and College of Agriculture, Food and Rural Enterprise (CAFRE).

The seminars aim to help farm businesses prepare their case for borrowing funds.

Location of events. All events start at 8pm

By Charlie Kilpatrick, Senior Business Technologist, CAFRE