Saturday, 31 October 2015 16:00

Keep constant watch on finances: specialist

Written by 
Agribusiness and cloud accounting specialist, Craig Sanders. Agribusiness and cloud accounting specialist, Craig Sanders.

Craig Sanders, agribusiness and cloud accounting specialist at Crowe Horwath, says farmers need to look at their financial information more often.

"You wouldn't fly a plane without instruments these days, would you?" he asks. However, when it comes to farming, he believes that is happening too often on New Zealand farms.

Many farmers only get a fully detailed account of their financial position following a review of their end-of-year accounts with their accountant. Sanders say this is often too late to make adjustments for a better financial outcome.

Sanders stresses this is no longer good enough, farmers need accurate and real-time financial information.

"While volatility is nothing new for New Zealand agribusinesses, large increases in farm debt over the past decade, particularly in the dairy sector, have put pressure on the industry during the recent fall in milk prices."

Sanders says while all farming operations face pressures like rapid price fluctuation, highly leveraged operations often have less room to move.

"Rapid or unforseen changes in circumstances such as a major climatic event or a fall in the payout can lead to severe outcomes for under-prepared farmers, especially those with highly leveraged operations."

Farming businesses need to be fully aware of their financial position. Farmers should know what drives their costs and be prepared to review budgets regularly as things change.

Sanders points to selling stock as an example, "It can often look fantastic for the farming business, in terms of a cash situation at the time of sale, but depending on what price was received and the costs incurred, the true impact might be very different when reconciling at the end of the financial year. Without a real-time accrual accounting system in place, it's hard to know."

Farmers need to have an up-to-date, accurate picture of where their finances are so they can make decisions knowing what impact they will have on their bottom line.

"There are some great cloud-based accounting software platforms on the market now, which will enable the farmer and the advisor to work closely together using real-time financial information to manage the farm effectively," he notes.

Sanders also points to the opportunity for greater collaboration between rural professionals that can occur with real-time financial information from cloud accounting platforms. "They can produce reports in real-time for the farmer, the accountant and the bank manager, tracking key metrics like funding headroom for example, allowing adequate overdraft facilities to be maintained well in advance. It saves some panicked conversations I can assure you!"

More like this

Report highlights good pay packets

A report confirming a sharp rise in pay for dairy sector workers will help attract more New Zealanders to farming jobs, says Federated Farmers dairy chair Chris Lewis.

Featured

 

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Fat chance

OPINION: This old mutt has always believed that any hopes of a possible free trade deal – that is any…

Health & safety?

OPINION: WorkSafe and workplace safety legislation dominate the daily operations of the private sector, including farms.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter

Popular Reads

Honda to quit ATVs in Aus

Honda Australia has signalled it will stop selling quads/ATVs in that country as the discussion about the effectiveness of Crush…