While farming hasn’t been hit by Covid-19 in the same way that the retail, hospitality or tourism industries have, it’s obvious things are anything but business as usual. That word ‘ volatile ’ applies to everyone, as we all evolve with a new economy - and indeed a new world.
One thing that is increasingly becoming an issue for farmers is the need for instant, up-to-date and accurate information on business performance to enable them to make fast, informed decisions in a rapidly changing environment. The variables that apply to these decisions (weather, commodity prices, exchange rates, regulation and demands from stakeholders) are changing quicker than ever and without timely correct information it’s hard to react.
And then there’s lending. While it was already proving hard to secure lending prior to lockdown, banks are understandably much more cautious in a Covid-19 affected world. The tide has turned and if extra finance is needed in a hurry, farmers need to present a lot more information than before.
For many in the industry, the thought of more budgets and spreadsheets is not an appealing one. When you spend your days outside in a very physical job, the idea of staring at a computer screen, trying to round up even more figures is not exactly a joy-filled prospect. The world we live in is volatile and variables change so people need to change their budgets and update their stakeholders in real-time. For example, over lockdown one of the major banks decided to issue a low milk price (unguided in my opinion) that sent many of our farming clients (and their lenders) into panic. We had moved from generating cash to haemorrhaging it overnight, it wasn’t a good situation. Add the stress of the drought and there were a number of farmers wondering if they should change careers. Those that were able to update their budgets in real-time settled the panic and moved into developing plans and strategies to handle such a pay-out
So what tools were these farmers using to update their budgets in real-time? Many of our clients are using a combination of Xero and Figured as their financial reporting software. The combination of these two products allows users to update the input variables at the click of a button to determine a forecast landing point for a season. Many farmers facing the drought that took the gloss off the 2020 season (not to mention the prospect of facing a $5.60 pay-out for the 2021 season) were in danger of exhausting their reserves to make it through the next season, unless they made changes to their annual plan. With Xero and Figured they were able to alter the input variables which updated and flowed through to their cash forecast and gave them an indication what cash was needed or available throughout the season. Based on this, some deferred capital expenditure, some reassessed provisional tax payments, some farmers were able to renegotiate with their lender. In some cases options were limited, but the business owners were aware of the possible result and informed their stakeholders. In addition to the real time information they were fully compliant with IRD.
Compliance is a word that is costing farmers more and more every season but there are new tools out there that can help. For example, PaySauce is also a great tool which automates payroll compliance and helps satisfy HR and regulatory requirements. It takes the stress out of doing your wages and ensures you meet the minimum employment requirements.
We are aware of situations where banks are renewing facilities with a stronger requirement for regular reporting. The reports we have been able to assist clients deliver to their bank from Xero and Figured appear to be the preferred option.
While technology was never a major part of the farming equation when the older generation were in charge, it’s an inevitable part of the industry today and while it may seem a daunting prospect, these tools are all developed with ease-of-use in mind. Once you get your head around using some - or all - of them, you’ll be able to forecast in advance and pivot quickly and easily when needed. This then allows you to focus on what is happening in the paddock and spend more time with your family.
Nick Hume is a Client Advisor at BFA. He’s a Chartered Accountant with a postgraduate in Accounting, as well as Bachelor of Business studies from Massey University with much of his 17 year career spent working with Agri-business clients.