Mike
Feneley, Partner with Haines Watts Rural Business talks about the upsurge in
profits for Dairy farming businesses and offers sound advice on how farmers can
use these effectively over the coming year…
Dairy farming profitability is on an upward path due to better milk
prices, better climatic conditions and more attractive costs of production
giving great opportunities to the dairy farming community. It is a time where businesses need to plan
carefully to ensure they utilise any extra profits effectively for the
future. There is no doubt that there
will be many suppliers to the dairy industry who will be licking their lips in
anticipation of the sales that they can make due to the extra profits being made
within the industry. It is vital for any
dairy farming business and for any business to ensure that those hard won
profits are used efficiently to achieve their objectives.
Mike comments; “Currently there are fabulous opportunities available for dairy
businesses. It is an excellent opportunity to drive business forward in a
positive way, however, farmers must ensure they plan it effectively so they are
not disappointed by the results.
Hopefully during the year ahead it will allow dairy farmers to produce
some really positive results which can reward them not only financially but
also in the sheer pleasure of running an effective dairy farming business.”
Looking ahead to the next twelve months
Mike recommends giving thought to the following:
-
When you are looking to the next twelve
months firstly focus on the basics of running an effective and profitable dairy
business, before you start adding extras.
For example, make sure that your soil PH is the correct level to make
good use of your nutrients before you start buying a special trace element
fertiliser. There are many areas of a
dairy business where you can get distracted by adding extras first. The most
profitable dairy businesses focus on getting the basics right first.
-
Make sure whatever investment you are
planning enhances the use of the assets you currently have available. The assets you have available include your
own likes and dislikes in terms of the type of system you like to run. Remember if a businessman enjoys what they
are doing because the system they are operating suits them, then they will
always achieve the better results.
-
Be careful in your investments to
ensure that they do not add extra complexity to your existing farming
business. In my experience adding
complexity to a business often adds extra cost that doesn’t necessarily create
any extra margin. Try to keep things
simple and streamlined in whatever farming system you are running to get the
best possible results from your efforts. Make sure your investments are fully
researched, getting guidance from independent people who have experience in
that area.
-
Focus your investments on achieving
your own business and personal goals. Do
not get distracted by investing in your business based on fads and fashions
that others may try to sell you.
-
When making additional profits if there
are not obvious investments you need to make consider building financial
strength by either debt repayment or building your credit balances. This may sound a little old fashioned but it
is far better to build financial strength in a business than it is to spend on
capital investment that may not be appropriate for your farm at that specific
time. Remember that investments in a buoyant period are often more expensive.
Always make sure your business is financially strong before any potential
downturn as there are often better value investments in those periods.
-
When you are contemplating your
investments for the future work closely with your accountant to ensure that
they are purchased in the most tax effective way. Remember to make the decision on a commercial
basis first and then get the tax situation sorted after you have made the right
commercial decision.
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