6 tips for improving short-term farm finances

Profits for dairy farmers have fallen by around 25% in the year to March 2016, with the rest of the industry experiencing similar difficulties.

Farmers Weekly asked accountant and financial planners Old Mill for top tips on how to improve short-term farm finances.

1. Planning

“Cashflow is likely to be the greatest challenge, even for businesses that have remained in profit,” says Old Mill head of rural affairs Andrew Vickery.

See also: Farmers welcome base rate cut, but economic outlook a bigger concern

Draw up a financial forecast early, making it clear when and where difficult periods may arise. This will give time to extend overdrafts and plan for these pinch points.

2. Sustainable cuts

Farmers can only survive for so long cutting investment in maintenance and repairs of equipment and property before it becomes detrimental to the business.

Astute farms have found savings through making more of grazed forage and improving labour efficiencies, which can and should be maintained in the long term.

3. Restructuring loans

Speak to loan providers to temporarily change how debts are being repaid.

Request a provisional change in repayments either through an interest-only system or a capital holiday, in which you can reduce or suspend payments for up to a year, depending on provider.

4. Managing projects

Ensure extra capital for business investments such as stock increases or small building projects comes from savings resulting from loan restructuring and other cut-backs instead of dipping into on-going cashflow or putting more pressure on already stretched overdrafts.

5. Streamlining

Scrutinise all costs carefully. Do not allow cuts that have been made in tougher times creep back in unnecessarily while the market remains volatile.

Adaptable farms are running more efficiently at the moment and it’s important to uphold this streamlining to give the best chance of good future profits.

6. Smart investments

Now is not the time to spend big or make large investments. If investments are essential it is critical to shop around to find the best deal and spend the bare minimum.

Appraise everything carefully and try to spread the cost over a few years through financing.

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

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