WHY BUDGETING IS IMPORTANT
Unpredictability of the market and weather is no longer a valid justification for not maintaining farm budgets. As the Environmental Land Management Scheme (ELMS) is introduced and Basic Farm Payment (BPS) subsidies are reduced, budgeting to forecast your future business performance has never been more vital.
Sitting down and putting together a farm budget will help you to:
- Get to grips with your cost of production per head or per hectare
- Use this information for benchmarking and establish where you could do better
- Decide where to invest resources and where costs need reviewing
“Quite often sitting down and taking a long, hard look at last year’s performance – which can be a good starting point for farm budgets – is an informative exercise in itself.” James Lutener, National Training Manager
QUICK TIPS FOR USEFUL FARM BUDGETS
Test multiple scenarios
There is no point in being overly optimistic when it comes to yield and price estimates, nor in assuming that costs will be lower than in previous years. But it can be helpful to put together two or three test budgets based on different price, yield and cost estimates.
This will help you to determine what level of volatility your business can withstand, as well as the level of overdraft required which will save you headaches and worry later.
KEYPlanner budgeting software allows you to create a baseline budget to copy and then change yields and prices with ease. This is much quicker than trying to do the same in MS Excel.
Use BPS and ELMS calculators
Some agents are now starting to put together easy to use calculators which help you estimate your subsidy income over the next seven years. Take advantage of these! Strutt & Parker have created a useful tool which anyone can request.
Review your progress and update your farm budget throughout the year
There is no point in creating a budget early on in the year, to never open it again. Your budget should be a live document. You should be looking at actual progress against budget on a regular basis. This will allow you to make changes and mitigate unexpected costs early on.
Landmark’s KEYPrime customers can import their budgets from MS Excel and then run a quick progress report to get this information in a matter of minutes. Call our support team for assistance if you would like to import an existing budget and pull off progress reports.
Watch the pennies…
It can be tempting to bulk costs together but monitoring, managing and reducing all costs, no matter how small, soon adds up. Split your costs out in both your accounts software (through effective use of your nominal, enterprise and analysis codes) and your budget.
Landmark customers can import their chart of accounts (nominal codes) straight into KEYPlanner budgeting software. This makes budgeting down to individual machine or input level a methodical task.
Do you have any tips not mentioned above? If so, let us know and we will share below!
KEYPlanner is a sector specific budgeting tool used by both farms and farm consultants across the UK.
“I use KEYPlanner for providing budgets and plans for a wide range of farming clients. It is user friendly and flexible. Most importantly the consistent reporting format, with both P & L and cashflow, is user- friendly and well received by banks and other lenders.” Rob Hall, Hall Consultancy
KEYPlanner (farmer version) is usually £345 plus support, though we are offering a £100 discount for purchases made before 31st December 2020.
For further information on our KEYPlanner budgeting software please call 01798 877100 or contact us online.