Top tips for a trim business

It’s not too early to start thinking about New Year’s resolutions, And if you change one thing next year, getting your business’ financial management in order will repay handsomely.

Farmers Weekly gets some expert tips from Nigel Parsons, Landmark Systems

Sound financial management means making the best use of the resources available, but the main thing is to make a start and the following tips may help to clarify where to focus your energy.

Make your financial recording systems work for you – not vice versa

If you maintain all your records in books and boxes, and this works for you, then continue, but there may be more efficient methods.

If you are using financial software, review the office routines to ensure that the system works for you. As the operator, do you get the invoices promptly and properly coded for you to enter? Are the routines easy to follow or are you duplicating data entry – for example between accounts and cropping software?

As the manager or owner, communication is vital so make sure you consider involve someone who understands your recording system and the farm to help with a re-appraisal.

Don’t let the tail wag the dog

Start with your requirements for information and work backwards. If you need to know the total value and tonnage of wheat sold during the harvest year or your average price/litre of milk, then ensure that the software is capable of (and set-up to) record this. Don’t just take what is given.

Review the farm’s performance over a cropping year rather than a financial year. Very few crops are planted, harvested and sold within one financial year, so ensure that you can report across the complete “farming” year rather than “accounting” year.

Do not be frightened to ask yourself the question “why?” There is no point in allocating machinery costs to individual machines if the information recorded is never used. Stop, and spend the time recording something more useful.

Provide your accountant with what they need – not what you think they need

Preparation of the annual accounts is one of the least important functions that your accountant performs on your behalf, surpassed only (from your viewpoint) from preparing your fee invoice.

By the time the accounts are prepared you should have an accurate view on the year’s financial performance. The preparation of the accounts therefore needs to be done as quickly as possible by your accountant, so that they can devote the maximum time to business and tax advice. Avoid headings in manual or computer records such as sundries. The final accounts will never show a sundries column – spare your wallet and the office junior who will have to spend several hours re-analysing these costs across the business.

Similarly, if all capital and repair expenditure is allocated blandly under “property repairs”, then your accountant has got to refer to each invoice to ascertain whether this is a tax-allowable repair invoice or a capital expenditure, so satisfy yourself that accurate descriptions are part of your inputting process.

Prepare budgets early

There are many farmers who avoid creating a budget saying: “How do I know what the price of wheat is going to be next September?” But a budget is a useful yardstick, and even working against the previous year’s figure can provide an excellent comparison which can warn early of trends and variations.

It’s vital that the budgeting routine is part of the accounts and not an isolated process. Ensure that your budget, if prepared in Microsoft Excel, can be automatically transferred to the accounts rather than being rekeyed from scratch. Show the actual performance alongside the budgeted performance to improve your accounts management. Once agreed, fix the main budget by all means, but use copies on which to base useful “what if” project planning.

Review the office machinery

Is your “office machinery” included within your farm machinery replacement policy? With the office PC/laptop being used daily for emails, web searches, payroll, accounts and livestock records it is probably as important to the farm as the telehandler.

If the office computer is approaching four years old it is probably “energy” inefficient, slow and potentially unreliable. The good news is that its replacement will cost less than a pair of tyres for the telehandler

Value your data

If data is held on computer do you have an effective back-up policy? Copying the accounts data monthly to a pen-stick and placing this in the gun cabinet is simply not enough.

Signing up to off-line back-up systems is incredibly good value. Storage of 5GB’s of data (enough for your emails, Word documents, accounts, spreadsheets and payroll) can be provided for around £12/month. It is a no-brainer to protect your computer contents from accident, breakdown or loss for an annual investment of £144.

Two money-saving tips

• Are you still paying everyone by cheque? Electronic banking is easy and the costs are falling while cheque costs will increase.

• Good software will include the facility to email remittance advices as well as sales invoices. If you send 40 cheques and remittances per month, and a further 10 sales invoices, you can save yourself £190/year in postal costs.

Nigel Parsons is managing director of Landmark Computer Systems.