Cornwall Strategic Farm business event report - 24.01.20 - Take account of your farm business

Overview of current farming practices

Take-home messages

• The 150ha of the Beef & Lamb Strategic Farm, Dupath Farm, comprises arable, potato, beef and sheep enterprises. The flock of 594 North Country Mules consists of 443 ewes as well as 151 ewe lambs bought in annually from one source.
• As Dupath Farm is currently involved with the AHDB RamCompare project, various ram breeds are utilised. All lambing occurs indoors between the end of February and the end of April. Finished lambs are sold deadweight through Dunbia.
• The 180 cattle are a mixed breed and finished at 28-30 months; sold deadweight through Kepak. Adrian works full time on the farm and employs another three members of staff part time.
• The 190ha of the Cereals and Oilseeds Monitor Farm, Smeaton Farm, comprises arable, potato, beef and sheep enterprises. Forage crops including maize make up 90ha, cereals including winter wheat, barley, oats and spring barley are grown and harvested on 92ha and the remaining 8ha are let annually to a local potato grower.
• The lambs reared from the flock of 220 North Country Mules are all finished on farm. All progeny from the 50 head Aberdeen Angus suckler herd are all fattened on farm along with another 30 purchased calves. Ashley works full time on the farm alongside his father.

How to get the most from your accountant

• Sarah Gay, Partner at Hodgsons, presented on how to get the most from your accountant and the common pitfalls experienced in a farmer-accountant working relationship

Take-home messages

• Sarah recommends to be clear about what you want to achieve from your business and for your family and yourself. In order to get the most from your accountant, you must talk to them and those conversations should be timely. To maximise the output from your accountant you should build a relationship with them and remember they want you to succeed.

• Sarah emphasised that tax should not be the driver for decisions.

• Appoint the right accountant for you and your business – someone that you can trust.

  • Does your accountant understand what you do?

  • Does your accountant have knowledge of your sector?

  • Is your accountant experienced in dealing with agricultural accounts?

• The right accountant should have sufficient technical knowledge of factors that affect your business – tax, VAT, loan finance etc.

• Nobody, however technically good, can help you if you are not open and clear about your objectives.

• Sarah reminded the audience that good advice is worth paying for. To get the most from your accountant and to have a positive working relationship you have to communicate, work together and trust each other.

• A good accountant can help you understand your objectives and act as a sounding board by understanding you and your business and challenging you accordingly. A good accountant can provide farmers with proactive and relevant advice with information on relevant tax changes, industry specific items such as grants or profitable and sustainable ventures. Above all else, a good accountant will listen and understand that farming is more than a business.

• Sarah talked through the variety of different legal structures businesses can trade under whether that be as a sole trader or a partnership, a limited company or a limited liability partnership. Sarah explained the differences between the legal structures and how profit is appointed as well as how much tax each structure is liable too in addition to national insurance contributions. Each business will have a different tax liability dependent on its legal structure.

How to present figures to your bank

• Presentation from Philip Dolbear (AHDB Cereals & Oilseeds) on what your bank wants from you and how to present figures to your bank

• Information from David Pett (AHDB Farm Economics) on FarmBench

Take-home messages

• Philip introduced the common banking acronym PARSER, used to establish the management of risk when considering an application for a loan.

  • Person/Picture

  • Amount

  • Repayment (budgets, cash flows etc.) – lending decision

  • Security – secondary source of repayment to trading

  • Expediency

  • Reward (rates and fees) – risk and reward

• If the risks are deemed acceptable, the borrowing is structured in such way to minimise the risk and negotiate an acceptable reward in return.

• Philip explained the use of Proportional Analysis to identify the key areas of a business which are not performing as they should.

• Your bank manager will likely ask you for a farmers statement, if you can go one step further and provide a farmers statement without being prompted, you will understand your own figures better and save time for your bank manager. A farmers statement consists of the following:

  • Management figures

  • Statement of all assets and liabilities

  • Total net worth calculation (assets minus liabilities)

  • Current assets – livestock, crops, growing crops, debtors

  • Current liabilities (due in 12 months) – tax, overdraft, creditors, next 12 months worth of hire purchase and term loan debt

• Philip defined balance sheet ratio terms including external gearing %, total gearing %, interest cover and current ratio.

• Knowing your cost of production is essential in knowing your business and how it is performing. David outlined the capacity of the AHDB benchmarking tool FarmBench and what it can offer in terms of identifying strengths and weaknesses within a farm business.

Further information

• Adrian’s Strategic Farm org.uk/farm-excellence/dupath-farm

• Ashley’s Monitor Farm org.uk/farm-excellence/saltash

• AHDB has a range of free monitoring tools available

• Assessing the business for Better Returns

• Managing ewes for Better Returns

• Understand your business costs with AHDB’s benchmarking tool Farmbench

• Sign up to market information and research newsletters

• Find out what’s going on at other Monitor Farms and Strategic Farms