Dairy on the mend
The dairy industry is much improved compared with what it was 18 months ago, according to accountant Pita Alexander.
A top farm accountant says in the present downturn, it's vital that farmers take heed of all the good advice on offer.
Speaking at a SMASH event in Palmerston North recently on farm finances, Pita Alexander says in his experience farmers often don't listen to people who are trying to help them the most. He says in his years of troubleshooting financial problems on farm, 30% of the farmers who failed to take his advice went to the wall.
He says some farmers won't listen to farm advisors and bank managers. The latter, he says are highly qualified people who have seen a lot of pain and can give good advice.
Alexander says when there is a downturn, some farmers 'turn out the lights', go into a cave mentality and lose interest and don't concentrate on running their farms properly, which is abolutely the wrong thing for them to do.
If they are staring down a loss, he says they must take it on the chin and focus on limiting any loss. And he adds some of the best advice they can get is from their wife or partner.
"Maybe she doesn't know all the intricacies of the farm, but she knows the weakness of her husband or partner. Knowing a man's weaknesses is a hell of an important thing," he says.
Alexander says partners are worth their weight in gold in a downcycle and says in his experience as a troubleshooter, it was the wife who was the realist.
"He was worried about not being able to go the pub, the football match and was feeling that he'd lost a lot of mana. But she always faced reality and was more concerned with what was happening daily such as the kids and their schooling," he says.
Alexander says, in a downturn, the farmer should be focused on sorting out cashflow and ignoring the temptation to spend up on large capital items such as farm machinery, which have a high capital cost plus ongoing costs such as interest and depreciation.
"If you can't afford something then you can't afford it and in a downcycle you must face reality," he says.
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