Setting up a successful financial systems for your agribusiness
23 December 2022
The 2021-22 farming year has seen an increase in farming profits for Hawkes Bay famers due to favourable weather and great farm gate prices. This was a welcome increase after a challenging 2020-21 year but moving into 2022-23, inflationary pressures and rising interest costs will put the pressure on, causing farm costs to lift sharply.
With this in in mind it is important to be aware of your financial position and putting in place robust financial processes, considering everything which applies to your business, for example, fertiliser costs per tonne, labour shortages and staffing requirements. The volatility in the current environment means that the approach of keeping on top of your financial position so you can make timely decisions is as vital as ever.
This process can vary, farming is busy, and budgeting may not be a top priority –which means you may keep this all stored in your head. Keeping in mind that increased interest costs of two percent might double your interest cost and cause pressure on other areas of your farm systems. Our team can assist in providing accurate and up-to-date view of your position, so that you can easily access financial information.
It is helpful to update your forecast every couple of months (in line with GST), whether manually or using software, so it is up to date with current, actual data and your information is correct.
We are encouraging our clients to produce budgets for the 2023 year from their Farm Focus or Figured (aligned with Xero) packages. This has meant in some instances starting from scratch and a quick learning curve, often this exercise moves into some annual tax planning as reducing 2023 provisional tax by estimation will assist with cashflow.
As Agri-advisors we understand the pressures being faced, and we are here to assist. Looking at your year-to-date actuals and planning for what's to come is a good starting point, also accessing stock reconciliations on a regular basis so that you can make timely decisions surrounding stock movement. Farmers are always committed to improving their business operations, as this is an industry that is often faced with multiple changes.
As rural advisors we are seeing a growing need for increased assistance due to taxation changes, increased independence from the banking sector around budgeting, and an overall greater complexity in the farming industry. We are here to support in all areas to ensure our clients continue to farm successfully.
For assistance on forecasting and budgeting for your agribusiness contact our agribusiness specialists here.