Financial planning should not just be used to get a loan or get someone out of difficulty. It should be a regular exercise and all stakeholders have to get involved, the Teagasc Dairy Expansion seminar yesterday in Mullingar heard.
Kevin Connolly, Financial Management Specialist, Teagasc told the seminar that the word ‘planning’ seems to strike fear into the heart of farmers. Many see themselves as ‘doers’ and planning is often not part of this, he said.
However, he said business planning gives a structure to allow farmers think ‘where is this farm going?’ “However, the time and structure to think is vital and is something that many farmers don’t take the time to do.”
Expansion, he said, might not be more cows or more steel, it might be exploring options already on the farm. “Then you road test them on paper, before you implement them on the farm.”
Working with professional advisors is vital for setting targets along the way, he said, and a properly formed business plan allows you to discuss your plans with the bank etc.
“A good plan has input from the outside, to ensure the plan stands up. The advisor’s role is sometimes controversial..and banks often wonder if the plan is the advisor’s or the farmer’s. But it needs to be the farmer’s plan. The role of the advisor is the challenge the ideas – is the farmer being too ambitious or not ambitious enough?”
However, the farmer must understand the plan and know the various targets along the way and, he said, the Teagasc ‘my farm my plan’ worksheets provide farmers with a structure in place around three key areas:
- Set out clearly what it is they are trying to achieve;
- Identify what is needed and the steps required: and,
- Basic cost-benefit financial analysis.
“It prompts farmers to think, assess their option and engage with the planning process. It takes the farmer through a number of key areas, including what they want and what they need to do to achieve the goals and analyse the risks”
He said the Teagasc Farm Business Financial Planner takes farmers through a five-year plan and deals with farm cash flow and profit projections.
Using the plan, though, he said was key. It should be used as a structure to map out how the business should run.