Bud­gets a vi­tal man­age­ment tool

Matamata Chronicle - - Rural Delivery - By ANNA BEN­NETT and GRANT EDDY

Abud­get al­lows smart de­ci­sion­mak­ing for your farm­ing op­er­a­tion. Cre­at­ing a bud­get may seem daunt­ing but now farm­ers have the per­fect op­por­tu­nity to give this some se­ri­ous thought.

With a volatile pay­out, and cash farm work­ing ex­penses in­creas­ing per milk solids in 2011, it is im­por­tant that farm­ers know fi­nan­cially what is go­ing on in their busi­ness.

Ex­am­in­ing his­tor­i­cal data will show ar­eas in your farm that are gen­er­at­ing the most profit and ar­eas which need at­ten­tion.

To ob­tain a bet­ter un­der­stand­ing around ex­penses use the Co­op­eraitken farm­ing dairy re­ports, which show av­er­age spend in all ex­pense cat­e­gories. With this in­for­ma­tion you can make bud­get de­ci­sions for this com­ing sea­son.

It is im­por­tant that once farm­ers have pulled a bud­get to­gether they then mon­i­tor ac­tual ex­penses against it.

Bud­gets should be shared with key peo­ple to your busi­ness such as your ac­coun­tant, bank rep­re­sen­ta­tive and farm ad­viser.

A bud­get will en­able you to know how much in­come tax and GST you will need to pay and when.

Specif­i­cally, farm­ers should be talk­ing to their ac­coun­tant now about the amount of pro­vi­sional tax due on June 28 and get an in­di­ca­tion for fu­ture pay­ments.

Us­ing their bud­get to plan for this will avoid the pay­ment of any ‘‘use of money in­ter­est’’ as well as avoid­ing an over­pay­ment of tax.

A bud­get helps an­swer the ‘‘what if’’ sce­nar­ios such as how a 10 per cent change in pay­out af­fects the bot­tom line.

This will aid fur­ther busi­ness de­ci­sions and your bud­get, and will give you the knowl­edge and ca­pa­bil­ity to plan for the un­fore­seen.

Cre­at­ing and fol­low­ing a bud­get will help with those large pur­chas­ing de­ci­sions such as pur­chas­ing new equip­ment, feed, more stock, a new farm, or pay­ing off debt.

The bud­get al­lows the decision to be made on ac­tual busi­ness needs rather than emo­tional wants and will take into ac­count ev­ery as­pect of your farm­ing op­er­a­tion. Busi­ness and per­sonal strate­gies be­come eas­ier with the in­for­ma­tion of a well thought-out bud­get. This al­lows for plan­ning cap­i­tal ex­pen­di­ture or an over­seas trip.

You can choose to cre­ate a bud­get by hand, us­ing a spread­sheet, or us­ing farm ac­count­ing soft­ware.

Your bud­get will never be 100 per cent ac­cu­rate and you need to con­stantly re­view what is ac­tu­ally hap­pen­ing.

Should any sig­nif­i­cant dif­fer­ences oc­cur you must re­fore­cast the bud­get and mod­ify your farm­ing busi­ness ac­cord­ingly.

Un­planned events will al­ways oc­cur such as a ma­chin­ery break­down but by hav­ing the bud­get you can re­act to the sit­u­a­tion in an in­formed and ac­cu­rate way. 2. At­tend AGITO cour­ses to help with you bud­get­ing skills. 3. Check out the Dairynz web­site for their on­line bud­get tool. 4. Use past re­sults bud­get­ing. 5. Be re­al­is­tic. 6. Re­mem­ber to sep­a­rate out bud­gets for fer­tiliser, feed and per­sonal draw­ings. 7. Align your bud­get to your long-term goals and know how much you need each year to achieve these goals. 8. The bud­get has to be your bud­get, not the bank’s. 9. Share your bud­get with your ad­vis­ers. 10. Mon­i­tor and mod­ify the bud­get and seek help early if things are not go­ing as planned.

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