Managing farm debt

If you’re feeling uncertain about your next year of farming, you’re not alone.

Farmer confidence is at its lowest point in 13 years with more than 11% of respondents to a Federated Farmers survey expecting a drop in profit over the next 12 months.

On a more positive note, when Federated Farmers asked members about their relationship with their bank, 67% of the 900+ respondents were satisfied.

Whatever your position is, it’s always beneficial to talk about managing farm debt.

How you handle cash flow is important to your suppliers and lenders, so even if you have a great accountant, make sure you personally have a grasp on your finances.  You could ask your business banker for a budget template or jump online.

DairyNZ has handy budgeting tools on its website that will take some of the head scratching out of the equation. It provides templates and guides you can print and work through, as well as ‘opportunity calculators’, including:

• The Contract Milker Premium Calculator, which compares the profitability of contract milking with managing a farm.
• The Variable Order Sharemilking Calculator, which gives an overview of the income and expenditure you can expect in your first year.
• The Herd-owning Job or Sharemilking Calculator, which helps you understand how much money you’ll need and how you can fund a herd-owning job.

DairyNZ budget templates include a sensitivity table to help you assess risk from changes in pay out, production, and farm working expenses.

Lincoln University also has budget templates for farmers, and ASB Bank suggests a cloud-based budget system called Figured that plugs into Xero.

Also income equalisation schemes provided by Inland Revenue may allow for some cash flow flexibility on tax payments arising from income fluctuations.

Talk to us about which options might best suit your business.