Time to make a bud­get

South Waikato News - - RURAL DELIVERY - By CORAL PHILLIPS

Imake no apol­ogy for an­other ar­ti­cle on bud­get­ing. Bud­get­ing has never been more im­por­tant – af­ter all the cur­rent fore­cast for the 2015 sea­son is lower than an­tic­i­pated a cou­ple of months ago.

The Fon­terra de­ferred pay­ments from June to Oc­to­ber this year of $1.90 per kg of milk­solids is much higher than usual, so per­haps the cash re­ceived to May 31, 2015 won’t ac­tu­ally be too bad for many.

If you are wor­ried, don’t put your head in the sand and hope the wor­ries will dis­ap­pear; talk with your ac­coun­tant.

Pre­par­ing a sim­ple bud­get as­sisted a farmer re­cently who needed to em­ploy ex­tra labour but was wor­ried that he could not af­ford to do so.

The bud­get en­abled us to see where the months of high­est over­draft were. The out­come was that he could ac­tu­ally em­ploy the ex­tra labour unit, en­abling ev­ery­one to keep their san­ity rather than do­ing too much with too few peo­ple on the team.

Choos­ing how to do your bud­get and which soft­ware to use de­pends on many things. How com­puter savvy are you? Would you pre­fer to get some­one else to do it? (If some­one else does your bud­get would you ‘buy-in’ to it and take own­er­ship?). Is the bud­get likely to be a one-off for fea­si­bil­ity of a new pur­chase, or an on­go­ing part of your busi­ness mon­i­tor­ing? Do you have the time to do it?

The ben­e­fits of pre­par­ing a bud­get how­ever far out­weigh the costs in­volved.

Us­ing an Ex­cel bud­get tem­plate is cheap and easy and it is sim­ple to cus­tomise it to your own sit­u­a­tion. A big draw­back of us­ing Ex­cel is un­der­stand­ing the un­der­ly­ing for­mu­lae. If th­ese are not work­ing cor­rectly, the bud­get can eas­ily give false re­sults. Per­haps GST isn’t be­ing ac­counted for, or ex­penses are not be­ing in­cluded in the totals.

Also, us­ing Ex­cel is a very la­bo­ri­ous way to com­pare your bud­get with ac­tual re­sults.

Dairy NZ have a good ba­sic bud­get on their web­site which I would rec­om­mend, es­pe­cially for young farm­ers start­ing out. Have a go and then take it to your ac­coun­tant to re­view.

Many ac­coun­tants use BankLink to process client data and clients can also use it to code their own ac­counts.

BankLink has a sim­ple bud­get, and re­ports can read­ily be pro­duced for ei­ther bud­get re­ports, or for com­par­ing ac­tual with bud­get through the year.

How­ever, as pay­out struc­tures from some dairy com­pa­nies are now quite com­plex, with ad­vance or de­ferred pay­ments, ca­pac­ity ad­just­ments, etc, the milk pay­ment cal­cu­la­tion in Bank- Link can be an is­sue. Us­ing the pay­ment pre­dic­tor from Fon­terra or Open Coun­try Dairy is a wise de­ci­sion.

Cash Man­ager Ru­ral ( CMR) is de­signed in New Zealand for farm­ers and is be­com­ing in­creas­ingly pop­u­lar, es­pe­cially among farm­ers who are want­ing a more proac­tive ap­proach to tak­ing care of their own GST and bud­get pro­cesses. CMR is now in the cloud, and it is very use­ful that per­mis­sion can be given to oth­ers to have ac­cess to the in­for­ma­tion at the same time. CMR has an ex­ten­sive bud­get fa­cil­ity, where much de­tail can be en­tered with­out the need for ad­di­tional re­ports to itemise how the amounts are cal­cu­lated. Drilling down in the cells quickly re­veals the de­tail.

For in­stance, to cal­cu­late feed costs you sim­ply en­ter ton­nage and price of the var­i­ous types of feed, and all this in­for­ma­tion is read­ily ac­ces­si­ble on the screen. The re­port­ing op­tions are also quite flex­i­ble.

Xero is in­creas­ingly be­ing used in com­mer­cial busi­nesses.

The in­for­ma­tion pro­vided is ab­so­lutely cur­rent be­cause of the way it works in real time. Huge progress is be­ing made for ru­ral ac­count­ing, how­ever, we are not yet able to get di­rect data feeds from all the ma­jor ru­ral in­sti­tu­tions.

It will only be a mat­ter of time be­fore th­ese im­prove­ments are made.

The more bud­gets you do, the eas­ier it will be­come. Or get your ac­coun­tant to do it with you. Sit­ting down to­gether us­ing your ac­coun­tant’s ex­per­tise and your on-farm knowl­edge pro­duces a bud­get that will have real mean­ing.

Coral Phillips is an as­so­ciate at Coop­erAitken Ltd Ac­coun­tants in Mor­rinsville, Mata­mata and Thames.

CORAL PHILLIPS

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