Max Sealy (Chippenham)

Many businesses will now be in receipt of their March 2024 accounts and will have completed their actuals versus budgets for that period and will now be looking at their Q1 2025 figures.

Using year end accounts to review overhead costs is a worthwhile exercise, particularly whilst the information is reasonably fresh in your minds.  Focusing on overheads is a useful thing to do, as it not only produces an annual saving, but where structural change can be made, can help savings in the years to come.  Key items are:

These become increasingly difficult to budget for farms because an average figure can be easily distorted by very large and out of proportion single expense items.  Look at the items of machinery you are carrying.  Discuss with staff how they are operated and cared for to avoid unnecessary expenses, but also look at the options for swapping and changing to different types of machinery.  At the moment, there are some good deals on swapping machinery, and it may be more cost effective and tax efficient to swap an item of machinery, rather than throwing ‘good money’ after bad.  Also look at who is doing your machinery repairs and servicing and see if there are repairs that you can be trained to do yourself, or use a local self-employed mechanic, rather than a mainstream dealer servicing.  Also look at where you source parts from.  Often shopping around can produce some surprising results, rather than just turning up at the parts counter and paying whatever price is required.

This is becoming increasingly expensive across a range of farms, mainly due to increased price in underwriting costs in the insurance market.  Shopping around is the obvious way to ensure you are getting good value for money, and it is essential that you do this well ahead of your renewal date. Getting copies of the policy documents from your existing insurer and putting these out to other reputable brokers who specialise in agricultural insurance.  This is an increasingly important point in terms of the quality of payout should you need to make a claim. 

Also, look at what you are insuring and for what values.  Do not simply accept everything in the policy document.  Buildings costs and insurance have obviously risen, and this is a key area of risk for under insurance.  They may be things you are insuring, that you don’t need to or other areas where savings can be made.  A good principle of insurance is to focus on risks that really hurt you. 

There has been a lot of confusion in the market over the last couple of years with a huge variety of tariffs, due mainly to when people’s fixed contract ended and whether they went onto a variable contract, but also the difference between night metering, day metering, smart metering etc.  Take time to benchmark what you are paying per Kw for night and day electricity and standing charge and get some good quotes from a reputable broker or shop directly.  It is surprising still what differences can be achieved.  Most importantly, it is knowing when your contract is due for renewal.  Most farms have multiple meters, so this can be on a range of dates.  It goes without saying that it is critical to ensure that efficient machinery is run efficiently and electricity costs is a key element of this. Such practices as clean machines, fans etc., will make a huge difference to running costs. 

This remains an increasingly expensive item for those farms on mains water and everyone should consider some form of farm-based supply.  Even on heavy based clay soils, this is becoming more possible to extract good quality water, even for a proportion of farm use.  Managing leaks and ensuring that water supplies have been used sufficiently are also important. 

A review of phone contracts and landline and broadband can produce some small, but significant savings.  Do you really need that landline connection?  Is your broadband fit for purpose?  What about your mobile contracts? 

Finally, a lot of things get lobbed into subscriptions for various organisations and societies.  It is useful to ensure you are paying the right amount and your membership level is correct.  These organisations typically make a big difference to the industry and should be supported.  Are you also subscribing to other groups and societies that you are no longer actively involved in?

None of the above will turn an unproductive business into a productive business, but a good review of overhead costs is often a useful exercise and gives you peace of mind that you have, at least, considered all of the options and put a value against those costs that you are incurring within your business. 

Overheads are sometimes known as fixed costs but can still be changed.  Don’t always accept what you are asked to pay!

Contact Max at maxsealy@fcgagric.com or your local FCG Office, to benchmark your overheads and other business costs for your type and scale of business.