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Get Farm Financially Fit - First Steps

No matter what the level or ambition of a farmer to keep their farm and household resilient to the constantly changing world and to be ready for the future, a farmer needs to follow four steps in farm financial management :

Think

The first step on the ladder is the “thinking process” behind what you are intending to do. It involves asking yourself a series of questions on where you are going, how you will get there and what extra profit or benefits your plan is expected to generate.

Thinking about where I am at present

  • Why am I farming?

  • What am I thinking of doing?

  • How is this going to deliver on my reasons for farming?

  • Where am I now?

  • How much income do I need given my life stage and future plans for family and farm?

Many of these ideas are already in your head but writing them down will help clarify them for you. It will help in assessing your situation and identify what to do next.

Monitor and Analyse

Identify your costs, revenues and risks

  • How much am I spending?

  • How much income am I making?

  • What could go wrong?

If you are not doing this, then thinking about these issues will help you to plan better. However writing them down and working with your advisor can help to make better choices.


Plan

Thinking about what I have to do

  • What are the main issues I must focus on?

  • What do I have to do to get there?

  • When will I make these changes?

  • How will my plan affect my working day?

Think about your skills set and skill needs

  • What are my strengths?

  • Where do I need help?

Act

The next step is the “financial process” where all your financial details are analysed for your farm and family circumstances to examine if your proposed farm plan is actually viable.
Preparing a financial plan will give you a much better understanding of the background to the figures in your financial plan.

Identify costs, revenues and risks

  • What are the extra costs?

  • What extra revenue will be generated?

  • What could go wrong?

Following completion of the farm plan, you and your adviser can then prepare a financial plan (annual cash flow, Profit and Loss and Balance Sheet) to fully examine the financial viability of your proposals.