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How to Manage Farm Finances

Keep actively managing your finances wisely and your farm will continue to be successful for generations to come.

Write a Business Plan

Your business plan should include:

  • Achievable milestones to work towards. This includes short term and long term goals as well as time scales. This will help you focus on what’s important.
  • Clear defined roles. Who is responsible for what? Decide who will be managing each area of your plan and make sure they understand what they need to do.
  • An operations plan. Outline everything that’s going to happen in the next year. Break it down to month by month if that’s easier, starting with a general overview and then going into more specific detail.
  • Financial forecasts. Using your operations plan, research into professional predictions for the agriculture market and your previous experience, create a financial forecast for how you think your farm will perform this year.
  • Work out expenditure and income. You can start this now, making a note of upfront costs and assets you currently have. Keep track of this as the year goes by, make sure you’re always aware of the current financial situation of your farm.

There are some other useful farm management things you may want to keep a track of outside of your business plan:

  • A list of all your assets may come in useful; you may even discover that you have assets that are currently just sitting unused and could be sold or leased out to fund part of your business plan.
  • Tax details and regulations. It’s a good idea to make sure you are familiar with all the guidelines you need to follow – a mistake could be costly or potentially fatal to your business plan and result in your farm shutting down. It is also worth noting that there may be tax benefits you are entitled to, so be careful to make sure you are using these benefits to your advantage.
  • Records of purchases, including dates. Knowing that your fertiliser goes out of date half-way through the year is an important piece of information you need for planning your finances. So is knowing that your machinery is several years old now and could incur maintenance or servicing costs in the coming year. Keeping a thorough inventory will really help with damage limitation to your profit margins.

Lastly, we recommend making short summaries of each section in your business plan – having an expansive and long document to read through every time you want to review the plan will be off putting and confusing.


2 Terrible Mistakes to Avoid

Poor debt management.

Any debt that is not carefully monitored, planned for and dealt with can grow and really come back to bite you.

Consider how much money your farm is capable of making in the time that your debt needs to be repaid. How much of that money is free to pay the debt and how much needs to be going elsewhere to maintain your farm?

Having long term debt is very bad, especially when high or growing interest rates are involved. Make sure to fully understand how much debt will cost you before borrowing. Take the time to sit down and work out exactly how long it will take you to pay off and how much interest will accumulate over that time – is it worth the risk?

Sometimes a loan can be a sensible solution but seeking financial advice and ensuring you fully understand the consequences of taking on that loan first are essential to smart farming finance practices.

Impulse decisions.

Temptations to deviate from your financial plan are bound to arise over the years. When things are looking up for your farm it’s even harder to fight the impulse to make a quick decision or investment.

This could become a grave error.

Whether it’s a brand-new variety of crop that’s all the rage or a desire to have all the latest farm gadgets, tech and equipment, making the decision to ‘go for it’ on an impulse could be disastrous.

Deviating from the plan means that you might be spending funds that are vital to the day to day running of your farm, or investing in a crop or product that costs more money than it makes – without taking the time to make an informed decision, you risk making your farm finances an unworkable nightmare.

Managing farm finances is essential to being successful in agriculture, but you don’t have to be a financial expert yourself. There’s so much help available for farmers: contact your local farmers network or regulatory body for guides and assistance with managing farm finances if you feel lost. If you have the funds then it may be worthwhile hiring a financial adviser with experience in the agriculture sector. Operating your farm like a business can be incredibly daunting, the key is to always know where your current financial situation is and seek help when it is needed.

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