Planning for the next wet day in Farming
Across most parts of the country, it has been a miserable spring. As we come into the key growing season there has been about 20% less sunshine than usual and well over 20% more rain – not to mention unseasonably late snow, frost, hail and gales. Spring cultivations in parts of the UK are up to a month late and even if crops can be drilled there will probably be a shorter growing season and lower yields. There is even talk of some land destined for root crops simply remaining fallow.
All of this means that cash flow is likely to come under pressure and forecasts which looked sensible six months ago may now need revision. So what can you do on the next wet day to increase your profitability?
1. Review your cash flow forecast
Spruce up the cash flow forecast with new acreages, probably lower yields and more up to date prices. If financial pressure points emerge consider how they can be eased or whether a call to the bank is needed. If so, better sooner than later.
2. Submit your books early
If your year-end has recently passed, why not tie up the loose ends and send the books to your accountant in May rather than December? Timely information is always valuable and, if the cash flow looks grim, it might be possible to look at the 2018 result and the 2019 projection and apply to reduce tax payments on account, if the evidence is strong enough.
3. Organise your personal tax information
Tax information is now arriving and better to assemble it now than to hunt for it at Christmas.
4. Plan ahead
Once the 2019 cash flow is done, you can extend it into a medium-term business plan to cover the next five or ten years. We can be fairly sure that there will be a change in the subsidy regime over that period so “stress test” the model to see how it impacts on your business. Slot in capital expenditure. See what happens when variables such as input or output prices change. What is the breakeven price for your key outputs? Once the picture starts to emerge consider what you can do to improve it. Is it time to look at succession and build that into your strategy? If existing tax reliefs are withdrawn and inheritance tax is due on succession, can it be funded?
Even though exact results can rarely be predicted, the discipline of planning and evaluating outcomes is a valuable one and will usually at least remove the element of surprise from next year’s accounts meeting. It might also make all the difference between the farm surviving into the next generation or not.
5. Check your title deeds
Before moving into action on the succession plans it is probably worth checking your title deeds. Who owns what? Is that ownership reflected in the farm accounts? Where is the borrowing secured? It is not unusual for this exercise to throw up surprises. But it is much easier to sort them out whilst everyone is alive (and still talking to each other). There is nothing like a death, divorce or partnership dispute to make land ownership problematic.
If you would like further advice on planning in your farm business, please contact our Agriculture and Rural Business team on 01903 234094.