Reflecting on the past six months
The start of the new year is a good time for farmers to look back on what has happened in the first half of the season and plan with confidence for the second half.
At this stage of the season you should be about 75 per cent through your costs, depending on your feed system.
Are you in the position you expected to be in when you did your budgets seven months ago? Are your expenses on target? Is your production on target?
If the season is looking better than expected, you can give some thought to how best to use the surplus funds. Options include reducing debt, buying capital assets, maintenance, investing offarm or achieving personal goals.
But if the season is proving to be worse than you planned, especially with the payout reduction which would have seen many farms losing close to $50,000, then thought needs to go to areas where you can reduce costs.
In this circumstance make sure you keep your bank in the loop, consider going interest only, cut maintenance or capital expenditure.
Remember, February 28 is when the second instalment of your provisional tax is due for those with a May balance date.
You and your accountant would have done tax planning in October and now have the benefit of half-ayear of actuals and a better idea of production and costs for the rest of the season.
It’s better to work with your accountant and get your provisional tax right rather than pay too little and get use of money interest charges, or pay too much when you are already struggling.
Now is a good time to think about what you want for next season. Jobs will be advertised – it is important to have your CV up to date.
If you’re looking for the next bigger position, for example moving from contract milker to sharemilker, start having discussions with your bank or accountant now so you can confirm you have the ability to borrow money, if needed, for cows and equipment.
If you are a farm owner and are looking for sharemilkers, contract milkers and waged staff, start investigating options now.
How many more years are you wanting to milk cows for?
Whether or not you are thinking about selling.
When to bring a sharemilker into the business.
How assets are to be split among the family.
Work with your accountant on your budgets to ascertain whether you can afford the options above.
You’ve probably had your 2011 accounts completed so now you should give some thought to working with your accountant to benchmark your performance against similar farms.
This provides powerful information that will allow you to easily see the areas of your farm which are out-performing others and those where you might want to consider changes to increase profitability. Naturally this benchmarking leads to goal setting for 2012.
The information will show you whether increasing profitability could be done by improving production by cow, by hectare, or whether your costs are higher than comparable farms and minimising costs is where you should focus your attention.
Your goal may be to grow your net assets and the report will help you determine whether this is done by reducing debt or increasing your cow numbers.
The benchmarking won’t help you determine your personal aspirations and goals but it may help you afford and achieve them.
Taking the time to reflect today will offer rewards for tomorrow.