Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help. Here, Simon Blandford of Savills suggests ways to get a farming business though difficult times if a BPS payment is delayed.
Q I am worried that the Basic Payment Scheme (BPS) income is very unlikely to arrive in December and we might have to wait until March 2016. I am a tenant on a mixed farm and am concerned about the effect this delay will have on my business.
A This will be a problem for many farmers. The introduction of BPS and its first payment is likely to cause the Rural Payments Agency (RPA) further problems. We expect the bulk of payments to be made well into 2016, and these are likely to be 5-10% lower than last year due to the current strength of the pound.
There are a several steps you can take that will help towards managing the potential cashflow shortfall:
First, review stock valuations, especially of grain in store. You may not want to sell into current weak markets but a deferred sale strategy will compound your cashflow predicament.
Draw up a sales plan and project your cashflow forward to see where shortfalls are likely to occur. Likewise with livestock. Although prices remain weak, the cost of overwintering may well outweigh the benefits of waiting for an upturn in values and the servicing of an overdraft.
See also: BPS information and advice
Speak to your grain buyer and see if an advance payment on grain sales is a possibility.
Check that all payments expected have been received and chase up any debtors, while reviewing expected outgoings for essential inputs, wages and any hire purchase agreements. This will give you a clear idea of what the shortfall for the next six months is.
Once you know where you stand, make sure you let anyone affected know there may be a problem with payments.
Speak to your bank manager – most agricultural lenders are well aware of the issues farmers face and most are supportive.
Make sure you have updated budgets and projections so that your manager is fully informed and he or she should be able to respond swiftly.
From experience, landlords by and large are supportive, particularly if they are made aware there is a problem before any rent arrears occur. You could ask to defer your Michaelmas rental payment. Any variation to scheduled rent payments must be negotiated to avoid breach of tenancy agreements.
Complete your VAT return in good time and cut out any non-essential expenditure, including deferring purchases until your projected cashflow improves. Suppliers may offer extended credit terms on inputs such as fertiliser or sprays.
Think laterally – are there any off‑farm opportunities for employment for any members of the family that would not jeopardise any tenancy succession? Consider selling any unwanted kit or scrap: this presents an opportunity to have a good tidy up and take stock of machinery usage.
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