Bank advises on F&M recovery
ADVICE to help farmers manage their way out of the foot-and-mouth crisis is contained in a new booklet from Lloyds TSB.
The publication, the latest in the banks Helping You Achieve Success series, examines specific issues confronting livestock producers who have lost stock through culls or on welfare grounds.
These include coping with lack of cashflow, what to do with compensation money (which has particular tax implications) and how to run a business without trading income for 6-18 months.
To ease cashflow pressure, Lloyds TSB recommends farmers suspend capital expenditure. Equipment needs may change and better deals may be available in the months ahead as suppliers become hungry for business, says the guide. Farmers should also restructure loans to ease interest payments.
The guide also offers advice on deferring tax payments and points out that some families may be able to claim working family tax credit (WFTC), worth up to £82/week.
Compensation payments should be protected, rather than being used to meet the daily demands of the business, says the bank. The interest saved by repaying or reducing debts will outweigh the return from an interest-bearing savings account, it adds.
Farmers should invest the remaining balance carefully, preferably in low risk, high interest deposit accounts with quick access.
Probably the biggest challenge is how to run the business with no livestock – and possibly no trading income – for the next 6-18 months. Cost control is the key to survival says the bank.
Overheads are the most critical area. Wage bills could be spread by finding employment on other units or by reducing hours, perhaps allowing staff families to qualify for WFTC. Some staff may have to be laid off; while it is tempting to create maintenance jobs, this may prove costly, the guide says.
Operating only essential equipment should contain power and machinery costs. Hire purchase and lease agreements should be reviewed and surplus kit sold where possible.
There may be scope to delay or reduce rent payments by negotiating with landlords, says the guide.
Finally, it includes a section on the way back, addressing restocking and the return to income generation for the dairy, beef, sheep and pig sectors .
This, and another recently released guide entitled Farm Business Specialisation Through Added Value Produce, is available from Business Banking Agriculture, Lloyds TSB Bank, PO Box 112, Canons House, Canons Way, Bristol BS99 7LB. *
• Ease cash flow pressures.
• Use compensation carefully.
• Keep overheads in check.
• Plan restocking.