CAREY Corbett Financial Solutions warmly welcome Kate Burke QFA to our growing team. Kate hails from Limerick and has over 12 years client-facing experience in the financial services sector.
Kate will be managing many of our current and future clients, providing expert advice on the full range of financial solutions for personal and commercial clients, including life, pensions, investments and more.
Established in 2004 by Donal Carey and Tommy Corbett, Carey Corbett Financial Solutions, based in Roslevan Shopping Centre in Ennis, is an independent financial services company that caters for both individual and corporate clients in all areas of financial planning.
We deal directly with all the major lending institutions and insurance providers in the marketplace, ensuring we can offer our clients the best independent advice on the management of their finances and future wealth options.
Financial solutions for the farming community
With the ploughing championships this week, and the beef farmers on the front page of the newspapers, now seems an opportune time to focus on our farming community.
As a scene-setting exercise, consider that farming households now pull in almost half of their income from other activities, tax figures have revealed.
The details published by Revenue, based on the tax returns of more than 146,300 farmers in 2017, highlight the dependency of farming households on other sources of income to maintain living standards.
The very mention of terms like ‘cash flow’, ‘financial projections’ or ‘farm business plans’ tend to immediately turn off most farmers.
This is understandable, as many farmers like the outdoors and the practical side of agriculture, while the thought of adding up reams of figures and working out calculations can be off-putting.
So, should farmers engage a professional to do the figures or not bother and let the last hour be the hardest?
The answer to this question, of course, varies from farmer to farmer.
Some farmers practise the same system of production year-in, year-out, so from experience they have a good gut feeling for the ebb and flow of their bank current account throughout the year.
These farmers should certainly be able to get away without doing any budgeting or projections for the weeks, months or years ahead.
This was very common among dairy farmers in the milk quota era.
Many dairy farmers are presently expanding their enterprises. Planning ahead is critical for these farmers, otherwise it’s like driving at night without the lights on.
In my experience, planning ahead minimises unexpected surprises and brings peace of mind to the farmer.
The following are simple steps to better cash-flow management and planning:
Information gathering
In simple terms, a farm business plan attempts to project the next set of financial accounts for the farm business.
Cash flow is effectively the balance in the current account in that period.
Correct mindset
Once the information is to hand, one must get into the correct frame of mind to prepare the farm business plan for the year ahead. There are three options:
Optimistic
Pessimistic
Realistic
There is absolutely no point being wildly optimistic – this will damage credibility with your bank and erode your own confidence in executing your plan.
It is a useful exercise to do a sensitivity analysis on your farm business plan, which is the pessimistic option, just to see how the business would cope in a difficult year, for example, at a milk price of 22c per litre.
The correct way to prepare your farm business plan is to be realistic with your forecast of income and expenditure.
Farm business plan detail
The farm business plan must include the following pages:
Basic assumptions
Balance sheet
Income and expenditure account
Source and application of funds Cash flow.
When the farm business plan is complete, the key performance indicators (KPIs) should be identified.
These will drive the business, for example, net profit, surplus cash, tonnes of grass grown, kg of milk solids sold and so on.
Monitoring
To get most benefit from a farm business plan, the KPIs should be monitored.
This should occur at least once a year, when the financial accounts and technical data are compared to last year’s farm business plan. Preferably, monitoring should be done on a more regular basis, such as quarterly or monthly.
Preparing management accounts on a monthly basis is a time-consuming task for most farmers. In general, it is easier to employ a bookkeeper with the aid of modern financial software to collate and input the data.
The farmer’s job is to make management decisions on the data, not burn the midnight oil inputting information to an accounts package.
If farmers get into a regular routine of gathering, preparing and monitoring key financial and technical data on their farm businesses, they become more knowledgeable on the main drivers of profit in their business.
This gives them an edge over their peers, allowing them to confidently make the correct management decisions.
Farm business planning may be unexciting and boring to many farmers but those who meticulously plan have more stable businesses and a better chance of growing and flourishing into the future.
Personal finances
Farmers should consider themselves as an owner/employee:
Do they have a pension and can they minimise their tax bill by setting up and contributing to a pension?
What happens if they are sick and cannot work? Do you have income protection?
What are their succession plans?
Seldom does a week pass that I do not get a query from a farmer about the matter of gifting a site to a family member and the possible tax implications of doing so.
The family member could be a son, daughter, brother, sister, niece or nephew and the taxes that can arise are Capital Gains Tax, Gift Tax and Stamp Duty. The relationship to the person getting the site will generally determine if a tax exposure exists for any of the parties involved and what the nature of the tax exposure will be.
Most people have the impression that there will be no tax implications for gifts and that is generally true in the case of transfers to children but transfers to other related parties may not be quite so simple. Indeed, even parent-to-child transfers are subject to strict rules, which, if not observed, could land a tax liability back at the door of the son or daughter who received the site.
Finally, farm insurance. Farm insurance can be complex with many different variables, depending on your farming circumstances. This can be one of the largest costs to a farm but paying for the right cover is the key. However, getting your insurance policy right will mean that you are protected from financial and legal liability for any problems that arise when you are carrying out your business with excellent and safe standards of care.
Whether you are running a small farm, or you are a large agricultural contractor, it is vital to ensure that your insurance cover is adequate.
Call your local broker, Carey Corbett Financial Solutions for guidance and expert knowledge on 065 6893540.
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