Building the farm business: Benefits of profit monitors underlined
The benefits of completing profit monitors regularly has been underlined in a new study – which has shown that farmers who do so are “more profitable and have increased the profit of their operations more” than their peers.
Teagasc dairy specialist George Ramsbottom outlined the benefits and process of the profit monitor, noting that the current time of year – early January – is a great time to prepare on and “reflect on the year gone by”.
Noting that Teagasc advisors are trained to complete profit monitor reports for their clients, Ramsbottom highlighted that: “Completing it early allows you time to put a plan in place to improve your farm business in 2021.
A recent study has shown that farmers who complete Profit Monitor regularly are more profitable and have increased the profitability of their farming operations more over the past decade than farmers who either never complete Profit Monitor or who only occasionally completed it.
The study, written by Ramsbottom, Doris Laepple and Karina Pierce, is titled “Financial benchmarking on dairy farms: Exploring the relationship between frequency of use and farm performance” and was published in the Journal of Dairy Science.
As part of the study, physical and financial data for 5,945 dairy farms for the years 2010 to 2018 were used.
The authors note in the abstract of the study that:
“Despite considerable fluctuations over the observation period, the overall change in total farm net profit between 2010 and 2018 was greatest for the frequent PM users (an increase of 70%, or €37,639), followed by farms in the infrequent PM user category (a 71% increase corresponding to an increase of €28,008 in net profit).
“Meanwhile, low PM user and nonuser categories showed increases of 69% (€26,270) and 42% (€10,977), respectively.
“The results of this study also clearly indicated the existence of a strong positive association between frequency of financial benchmarking and greater technical and financial efficiency,” the abstract says.
Commenting on the compiling of a profit monitor, Ramsbottom said: “Most of the physical information you need is available from the ICBF website.”
“Financial information can be collected by completing a worksheet or generated automatically by some of the specialised farm accountancy firms.
“Have a read through the information to make sure that it’s correct before submission and discuss with your advisor to discuss where the improvements can be made in the coming year,” the specialist added.
Teagasc provides a farm business financial analysis service using the eProfit Monitor programme.
“Once you have the information on your farm output and costs of production then you can begin to identify areas to focus on for improvement by carrying out a comparison of your farm figures versus a target or versus results form other farms locally or nationally,” Teagasc says.