Allaster Dallas (FCG WhiteAvon)

When it comes to the new year, “in with the new” and “out with the old” is often said.  2024 was a roller coaster ride for farming businesses all over the world.  Weather, war, and political changes have affected everybody.  The UK Government has managed to pull down inflation although policies to encourage growth have been harder to find.  This has led most businesses and consumers to act like sulky teenagers and keep their hands in their pockets!  Cash has been tight; for most businesses this year, physical cash will remain the underlying discussion point.

Uncertainty leads to anxiety, which in business leads to a reluctance to spend or invest.  In farming, this has been particularly felt with changes in government and the weather impacting crop and livestock yields.

Factors that will likely affect cashflow:

Most UK agricultural businesses are just getting over 2024 financially!  Seasonal fluctuations in cash were very noticeable last year in terms of production and price.  Having a cash reserve and managing it through leaner production periods is crucial.

Credit limits are being squeezed as suppliers feel the pinch.  In some cases, this leads to delays in deliveries and can knock the physical performance of individual businesses, particularly for feed and fertiliser.  Many farming suppliers have improved their operating efficiency; they collect quickly to improve their cash flow, and many will reduce stocks further to improve cash flow.  This will impact availability and price.

Capital investments will need upfront cash, which is particularly poignant when capital grants are on hold.  It is important to measure the improvement of any investment, even if it is net worth.  This is rarely done in agricultural businesses and can negatively affect future cash flow.  By not measuring the value of an improvement, a business risks underutilising that resource.  How many people go back and look at whether assets on their books have paid for themselves?

Debt repayments, such as loans and finance, are paid out before a business decides to pay invoices.  If finance agreements are ending, are there different, more cost-effective opportunities available or ways the business can change to negate these entirely? 

Tax. Having a strategy and knowing the timing of that obligation will impact agricultural businesses in 2025.

Stock control and the ability to spend and store materials will help individual enterprises maximise their potential and minimise the negative effects on cash flow.

Communication is vital for a business’s financial health.  It shows suppliers and contractors that a business is viable and provides confidence.

How and when to spend cash will become increasingly important in the future.  Opportunities will come for businesses that can negotiate payments and manage their cash.  Protect your money; everyone wants it, and it is important in bargaining the price of inputs.  Budgeting and forecasting will help businesses manage their money and find ways to improve cash flow, and measure capital improvements.

Contact Allaster at allasterdallas@fcgagric.com or your local FCG office, to help with cashflow planning in your business and help identify the peaks and troughs early.