Benchmarking key for farmers

Intoday’s business market, you should take advantage of all tools at your disposal that give you the ability to work on your business rather than in it.

Benchmarking is one of these tools and can prove usefulwhenfarmers, bankers, accountants and consultants need tomakeinformed decisions about the productivity of a business (farm or non-farm) relative to others with similar businesses.

As most farmers have recently prepared or are in the process of preparing 2020 annual accounts, nowis the perfect opportunity to benchmark your farm and see howyour results compare with the rest of the farming community.

Howdo Iuse benchmarking data?

Having your farm benchmarked gives you the ability to pinpoint areas of improvement such as lambing and calving percentages and returns and economic farm surplus per stock unit and per hectare (ha). Benchmarking should form part of your annual business review practices and the data should help inform your goals and KPIs for the following year.

Howdo I benchmarkmy farm?

Anumber of factors and definitionscomeinto play to form an accurate benchmarking report for your farm and it is important that your data is comparable and realistic as this is a key factor inhowbenchmarking data is analysed.

Depending on your circumstances, youmayneed to determine key comparison data across calculations such as:

■ Stock units per ha.

■ Sheep/cattle/deer ratio.

■ Gross farm income.

■ Economic surplus per ha.

■ Farmworking expenditure as a percentage of gross farm income.

Looking at historical trends gives an indication of where your farming business is heading and where it has comefrom.

Andanalysing the data and historical trends of the top performing farms such as the top 25 per cent, can provide the basis for establishing annual targets and key policy decisions.

Utilising all available data and financial tools will provide a fresh independent perspective on farm performance and continuous improvement. If you’d like any assistance getting started with this process, please contact the Findex Business Advisory team at findex.co.nz.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex NZ Limited.