Cashflow advice to help weather the storm
© Tim Scrivener Cash is tight now, but farmers need to be looking ahead 12-18 months to prepare for the continuing effect of several poor seasons, warn advisers.
Budgets and cashflow need attention and constant adjustment after an expensive winter for livestock producers and dramatic changes to cropping plans on the arable front.
Now is the time to review, says Andrew Wraith, head of agribusiness at Savills, before harvest pressures are upon growers again and the options narrow.
Key advice includes:
• Remember items bought on deferred payment terms
• Review planned investments – an annual investment allowance of £250,000 is only worth using to offset tax if the profit has been made in the first place
• Replacement costs for significant pieces of kit may come as a shock – consider deferring, using a contractor or becoming a contractor
• Consider renegotiating repayment timings on machinery purchases – providers are generally flexible within reason, but habitual offenders will find it more challenging to achieve changes
• Watch fertiliser prices – there are some keen terms for early orders and deferred payment terms are likely to be more common than in recent times
• Grain sales – even though many growers are understandably wary of early commitments (which caught them out on both price and yield last year), current prices don’t look bad, so a commitment of 20% would be prudent
• Unless forced, it’s probably not the time to make drastic changes to systems and structures, but the sale of off-lying land parcels could be the answer for some – but watch capital gains tax implications
• If selling machinery to restructure, again watch for tax implications, which must also feed into cash flow
With many farms doing a lot of spring cropping, realistic yield expectations must be used in budgets, warns Geoff Brookes of consultant Laurence Gould. Although a difficult area, staffing levels should also be questioned, he says.
As well as considering full-time staff numbers against seasonal worker options, there may be more flexible ways of working, for example arrangements that would give regular staff more time off at quiet times in return for longer hours at busier times. However, he stresses that any change to terms of employment must be negotiated and legally compliant.
Budgets also need to account for the possibility of an increase in the cost of straw, says Mr Brookes.
Managing the next 12 months will be even more critical for livestock producers already looking at a tight cash flow, says SAC consultant Robert Logan.
“Monitoring the current account identifies the cold, hard cash position of the here and now, but we need to think about where it is going and manage accordingly while also having an eye on minimising the repercussions on the 2014 crop of calves and lambs,” he says.
With such a slow start to spring across much of the country, weight gain from grass is liable to be lower, risking delayed sale dates or selling less kilos of lamb and beef.
“Either way, a delay and/or drop in sales creates further cash pressures. Flockmasters in some regions are already in line to sell less stock as a consequence of the weather, particularly from September onwards last year,” adds Mr Brookes.
| Robert Logan’s practical measures to ease the strain |
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