Farmers may have to close cheque books

Dairy farmers that have targeted spending restrictions, prepared a cash flow budget for the year ahead, and are committed to on-going cash flow monitoring during 2015, are taking the right steps towards insulating themselves against the worst that 2015 can bring, say Teagasc advisers.

“Where cash flow comes under pressure, review and prioritise spending. Current spending should be focused on those expenses that provide an immediate rather than a long-term return.

“Be careful on how you fund capital investments, capital investments should not be funded from the current account,” said Teagasc Financial Management Specialist Kevin Connolly.

Every farmer should know their costs of production, Teagasc advisers will be working with farmers to complete a Teagasc eProfit Monitor for the 2014 production year. Farmers can then project forward for 2015, using the output and input price projections outlined at the recent Teagasc Outlook 2015 conference. This will show the likely final effects on both profit and cash flow.

Farmers can use this information to identify areas where it should be possible to say, ‘The cheque book is closed.’”

All farmers, especially those with high borrowings, should keep their bank informed of their cash flow projections for 2015, and how the expected milk price is likely to impact on cash flows.

Farmers who want help in preparing an annual cash flow budget should contact their local Teagasc Adviser. Over the last six months, Teagasc, in conjunction with the Department of Agriculture, Food and Marine, have delivered a series of training workshops to around 760 farmers under the banner of the Cash Plan 2014 Programme, on cash flow recording, budgeting and farm business planning.

Advisers will follow up with these farmers to put their newly learned skills into practice.

And all farmers will be encouraged to adopt regular cash flow monitoring using tools such as the Teagasc Cost Control Planner.