Shropshire farmers warned to budget to avoid financial disaster

Louise Hudson, a chartered accountant of Hudson LM Ltd, said it was vital for farmers to keep on top of their finances and to forecast their spending as costs continue to rise through 2013.

Mrs Hudson, who runs her business from her family farm in Whittington, near Oswestry said: “Budgeting and forecasting for the year ahead is important, particularly for farmers as incomes and costs can fluctuate dramatically.

“In my experience, those businesses with a plan, forecast and budget, tend to perform better than those without - the main reason is because they know what their financial capacity is, where they can afford to spend and invest capital and where they need to cut back.

“It also helps to identify parts of the business which are perhaps underperforming, are loss-making and could be either scrapped or curtailed, leaving resources to focus on the more profitable units.

“This also helps to forewarn of any months where cash could be tight and a call to the bank manager may be required to fix up an overdraft beforehand.”

Mrs Hudson has first-hand knowledge of farming as a farmer’s wife and also specialises in agriculture and rural business accountancy due to her expert industry knowledge.

She said farmers, apart from dairy farmers, did not receive a regular business income and also sometimes had to wait 12 months for money to come in while having to fork out on more equipment and livestock.

Mrs Hudson added: “This requires a significant level of cash flow management and can put a severe strain on business.

“Farmers and landowners who already have existing borrowings - loans and overdrafts, or who are looking to ask their bank for lending, will be in a much stronger position to be successful in borrowing money and getting a lower interest rate - if they can demonstrate to the bank they have quality budgets, forecasts and up-to-date financial information and generally that they are financially aware of their business position.

“The benefits of forecasting continue - there are often good tax planning opportunities for farmers to save or defer tax and having good financial information can maximise these opportunities which results in leaving more funds to invest in the farming enterprise rather than into Government coffers.”

Mrs Hudson added: “Farmers who do not feel they have the skills or confidence to produce suitable financial information themselves should seek the advice of an accountant who can help them to prepare the numbers and explain what they mean.

“It’s not always necessary to have a fancy system for producing a budget or forecast, the main aim is to get quality information, presented in a user friendly and understandable way but computerised systems can save time and with a bit of training are manageable.”