The impact of last winter’s weather on farming businesses, economic and regulatory change, coupled with more recent uncertainty in the economy as a result of Covid-19, has reinforced the need to be business-minded – now more than ever.
“From recent conversations with clients, it is clear there is real need for farmers not currently assessing their future cash requirements to do so swiftly,” said Dan Murphy of Savills food and farming team in Salisbury.
“Successful business managers tend to plan their business meticulously and monitor every enterprise on a regular basis. The ones who come unstuck are usually those who pay little attention to it.
“This year’s pandemic has served as a timely reminder of the fine balance between success and failure. For some, Covid-19 has had a profound effect on markets and, bizarrely, for others it has opened up new and exciting opportunities. The food supply chain, for instance, has adapted quickly and responsibly to the issues raised by the pandemic and fears of empty shelves and food shortages were ill-founded.”
As we head towards the end of the year, here are five points to consider when reviewing business strategy and cash flow management:
- Look at your business cash flow for more than 12 months at a time
Budgeting and cash flow forecasting typically prepares 12 months forecasts in line with financial year ends. Now is a good time to ignore accounting years and to think about your farming years. Be thorough and be honest. - Be realistic in your forecasts
Plan for the worst and hope for the best. We know commodity prices can be volatile so only use cautious yields and pricing when planning a long way ahead. If you can forward sell or play the markets with your commodity then consider that as part of your marketing but whichever way you choose, understand your business. - Challenge every aspect of your spending
Buying groups and other farmer co-operation groups can offer real discounts on purchases of many inputs. But moreover is there a completely different way of producing that commodity? Can you get ahead of your competitors by making radical changes to your spending patterns? - Communicate with your bank
Communication is a two-way street. Prepare fully reconciled cash forecasts to highlight where the difficulties might arise in the future. If you encounter a problem along the way, be open and be ahead of the problem. Bank managers don’t like nasty surprises. - Seek out alternative funding
Talk to your suppliers about trade credit schemes and ‘time to pay’ options. Trade suppliers are not banks and are increasingly acting accordingly with long-term customer debt.
For more information, contact Savills food and farming team on 01722 426851.