Coral Phillips sets out some very clear guidelines for dairy farmers on how to use your budget as a key management tool

By Coral Phillips*

By now you will hopefully have your 2014/2015 budget in place.

So what can go wrong?

You put it away in the drawer and bring it out at the end of next season, instead of keeping a close eye on it.

Or you keep updating it through the year, without actually addressing the cause of the issues that have altered it.

Don’t let this be you…

The pay-out is predicted to be around $1.50 per kg milksolids down from last year, so it is important to have your finger on the pulse.

Copy your original budget and continually revise and update this during the year.

Talk to your bank earlier than later; don’t wait until the overdraft limit has been surpassed.

Interest rates are forecast to continue rising by 0.25% per quarter for two years. Bank managers like customers who communicate, manage their cashflow wisely and don’t spend on large personal items when it is not there.

Spreading costs by monthly Automatic Payments can help with the cashflow.

Shop around for the best prices.  You commonly do this for stock feed, get in the habit of doing it for other items and the savings will mount up.

Use your phone as your time is also precious.

Check all invoices before paying them. You would be surprised how often customers are inadvertently overcharged, perhaps the tonnage is wrong or the price doesn’t match the quote.

We frequently find stock sales are incorrectly credited, and sometimes this is several thousand dollars which we are able to get back for our clients.

Feed budgets become more important as the pay-out decreases. Take care that the bought in feed is necessary, and the return to the vat is profitable.

Look after your assets. Ensure maintenance is done on your plant and machinery early. Leaving a small repair often results in a major cost because that breakage led to something more expensive.

Do you know how to easily reduce your motorbike expenses? Leave the quad bike in the shed! Use your two-wheeler wherever possible as the running costs are substantially lower.

Claim fuel excise duty on all motorbike and tractor petrol. A refund of approximately 58 cents per litre is definitely worthwhile.

Are you on the most beneficial cover for ACC?  Are you getting the 10% discount for having attended safety workshops or implementing on farm safety programs?  Many people pay more for ACC than necessary.

Use the free services provided by DairyNZ. These include useful resources on their website, as well as advisors, discussion groups and events to help improve your management.

Keep a strong professional team around you.  Talk to your accountant – don’t wait until you are in strife.  Your accountant is there to work together and provide solutions to problems.

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Coral Phillips is an associate at CooperAitken Ltd, accountants in Morrinsville and Matamata. You can contact here here