Many dairy farmers are finding cashflow quite tight at present with high feed costs, the effect of the drought and milk prices having peaked too low to sustainably cover cost of production.  The recent HSBC forward planning publication showed negative margins on the average dairy farm before BPS for 2019/20 forecast.  Many dairy farms will be paying tax at the end of January based on a reasonably good year 2017/18 and will be wondering how to mitigate these effects.

The first step is to speak with your accountant and factor in 5-year averaging and whether the possibility of reducing payments on account can be used.

We join in a lot of these conversations with our clients and their accountants, looking at prospects for individual businesses, based on their actual results to date, plus their remaining predicted profits for the rest of the year.

Our arable clients have generally had a good year, and this is propping up many mixed farming businesses.  It is also very important to remember the effect of the drought on your closing stocks of forage, which were generally quite good at 31st March 2018, but very low or non-existent at 31st March 2019, so cashflow is not everything.  For example, if you had 1,500 tonnes of silage in stock, valued at £30/tonne in March 2018 and nothing in stock on 31st March 2019, this would be a drop in profit of £45,000 on paper.

Using our farm accounting software, it is possible to accurately predict your yearend position before tax payments are made in January.

Other things to consider in individual businesses now are whether you should be bringing in partners, or making payments to family members for work done, all of which need planning well in advance of the yearend.

With a lot of uncertainty in the world, as a certain Mrs May might say, now is the time to bring as much certainty to your business as possible and shrewd cashflow planning is the basis of this.

Contact your accountant, local FCG office or Max at maxsealy@fcgagric.com to discuss these matters further.