Running a farm is a volatile business. Knowing how to effectively manage your finances can play a pivotal role when you are faced with those tough times. We have put together 5 handy tips that can help you manage your farm finances that can help take your farm to the next level.
Know when to tighten your belt
With 65% of Australia's farming produce going to overseas markets, it's clear to see that the market place plays a vital role in most farmers revenue. It helps to have an emergency buffer in place for when the market takes a slump or when you don’t hit the target. This can be done by tracking every dollar and checking where you can possibly cut back to add to the emergency fund. This may seem tedious at first, but it will come in handy when stuck to consistently.
Estimating your expenses
Having a budget in place is one of the key components to managing your farm. You may not be able to budget for every expense, which is why the first point is vital. Knowing the expenses that come with producing your product can ensure that you take out a commercial loan or any financing that can adequately cover your expenses. When estimating expenses keep in mind to account for depreciation, maintenance, repairs, marketing, variable and fixed costs that are applicable to your business.
Make financial decisions that align with your cash flow
Whether you are planning on taking out farm finance or using your own capital, it is vital to make financial decisions that help you maximise your cash flow. This can prevent your business from falling into a debt trap. According to the Royal Commission, Australian farms owed a total of $71.7 billion in rural debt. Broadacre farm debt stood at an average of $616,900 per farm which was an increase from previous years. If you are planning on taking out a loan it is important to check that you will be able to comfortably meet its repayments and that it works with your budget.
Call in the professionals
There are many moving components that come with running a farm. This can make things difficult to manage, especially when it comes to the financial aspect of your farm. Hiring an account can be a good investment when it comes to tracking your farms' finances if you do not already have one. Not only will they be able to tell you about the potential tax benefits that your business can get, but they can also highlight expenses that you may have overlooked.
Make smart investments
Whether you are choosing the right equipment or financing that comes with flexible features that allows you to run your business efficiently at an affordable, it pays to compare. After all, this is an investment and you would want to get the most out of it. Speaking to a financial advisor or a broker can help find a tailor-made solution that will work for you and your farm.