Welcome to the new questions and answers page. We'll move on to different topics as the season goes on so check back regularly for updates!
I have a meeting with my bank manager coming up, how can I be prepared to make the most of this meeting?
You need to give your bankers confidence that you know where your business is now, where it is going and what you will do to get there.
This requires a plan and budgets which demonstrate business profitability (that the business will be able to meet its debt servicing commitments in the next 3-5 years) and liquidity (that your business has sufficient cash to meet commitments in the short run).
Short term cost cutting may impact long run performance, so look at medium term profit first – you and your bank both want to know your business is on track to be profitable in the future. By looking longer term you can consider changes to the way your business is set up and operated, as changes will take several years to take full effect.
You’ll need to:
- Know your financial position now - assets, debt and liabilities.
- Have your cashflow budget for the current financial year - showing actual vs budget and updated to show year end position.
- Know how your business is performing relative to others, and its relative risks. For example, are your farm working expenses, personal drawings and debt servicing costs relatively high? You can find this from benchmarking, looking at high performing farms and talking to advisors.
- Have a business plan, budget and cashflow for the year ending May 31, 2017.
- If you are planning significant changes, you will need expert advice and support to show your changes are considered, realistic and well planned.
Acting with honesty and openness is key for any interactions. A 'no surprises' policy always works best.
What sorts of questions should I ask my bank manager to help me get sorted for next season?
To be prepared to get the most from your meeting with the bank it is also useful to have some key questions you would like to ask at the ready. Here are some examples of questions you may like to ask.
- What are your successful clients doing to get through this?
- What steps should I be taking to make our business more adaptable?
- Ask the bank manager to provide feedback on your budget/cashflow/monthly updates
- What pay-out and interest rates should I be setting in my budget?
- What is the banks short and medium term milk price?
- When will we have reviews and what do I need to have ready and when?
- What are my options around managing my interest rate risk?
- What is my credit rating and what does that mean?
- What are the factors that drive my credit rating?
- What are the borrowing facilities (term debt and overdraft) for my business?
- How does the bank view my business and what are my options to improve the banks view?
- What is the value the bank has put on my land and livestock?
What are the terms and conditions of my borrowing? Ask bank manager to provide bullet point summary of the loan conditions.
What information do I need to gather for the 2016 financial year end?
Most dairy farmers will have either a late (May 31, 2016 or June 30, 2016) or standard (March 31, 2016) balance date for accounting and tax purposes.
If you have a late balance date, June and July are the perfect months to make a start on collecting the necessary information so your accountant can prepare your financial accountants and tax returns. If you have a standard balance date, you can start this process in April.
Your accountant may require you to complete an information checklist, so ask for a copy of this. We outline below the information commonly asked for:
- Bank statements for your business and loan accounts, covering the whole financial year. If you use accounting software, a copy of the trial balance / general ledger / annual accountant report can be provided instead.
- Accounts receivable: a list of all amounts owed to you at balance date (including GST);
- Accounts payable: a list of all amounts owed by you at balance date (including GST);
- Monthly supply statements: copies of each monthly milk supply statement for the season;
- Investments: statements supporting interest and dividends received during the year, transaction detail for any shares or bonds bought or sold during the year, and year-end reports for any other investments;
- Fixed assets: details on any new fixed assets purchased during the year or any old fixed assets disposed of;
- Livestock: a reconciliation of your closing livestock numbers including a summary of livestock bought, sold, born or dead / missing;
- Off farm income: payslips or other supporting documents
- A summary of any significant transactions undertaken during the year.
Your accountant may ask for additional information, but the above is a good start.
What financial assistance are we eligible for?
Work and Income have created a fact sheet outlining the types of assistance that is available to those in the farming sector. Click here.
I can't afford a full time staff member but need to have someone on board over spring, how do I best go about this?
The best option is to employ someone on a fixed term employment agreement which means you employ someone for just the period of calving. When recruiting make sure you advertise that the job is fixed term, i.e. it has a start date at the beginning of calving and an end date at the end of calving. Ensure these dates are written into the employment agreement.
You can either agree a salary for this position or agree to pay an hourly rate. Either way it is important to record the actual hours that the person works and the rate must be above the minimum wage of $15.25 per hour for each hour within the pay period (maximum of a fortnight).
Employees on fixed term employment agreements are entitled to the same rights as a permanent employee, eg they accrue annual leave and are entitled to payment for public holidays, and you both must act in good faith at all times.
Fixed term employment agreements are available from Federated Farmers, rural professionals such as people management consultants or you can create your own using the Ministry of Business, Innovation and Employment website about employment in New Zealand.
I'm starting a new team member in June – how do make sure we get off to the right start?
When your employee starts they should go through an orientation which is the introduction your employees have to their new job and your farm. Following a systematic process of introducing staff to their new job and the business will set your new staff up for success.
Orientation provides the best opportunity to start the employment relationship off on the right foot and to ensure expectations are clear from the beginning, as your new employee will be able to operate safely and quickly contribute to the team which will avoid mistakes.
Spending time with your new employee making sure they understand what is happening, how the farm works, the way you do things and how they fit in means they will get up to speed quicker. This will lead to improved work performance, increased satisfaction and motivation for them and reduced stress for you and the team.
Some things to remember:
- Orientation starts the day your new employee signs their employment agreement and continues for at least three months right up until the end of their first year - when they have experienced everything on farm.
- Compile important documents that need to be kept for an employees file.
- Follow a good orientation process, don't just leave it to chance that everything will get covered. The QuickStart orientation kit can guide you through the process and ensure all key areas such as health and safety, farm policies and procedures, the farm business, completing paperwork, employment terms and conditions, rules and conduct, and position expectations are covered.
- Assess skills of the new employee as you go and create a training plan to bridge any gaps. Set aside time to ensure that this training happens.
- Consider how you can make an employee and their family's transition to a new farm and community run smoothly.
Ask a new employee on a regular basis how it is going and allow them time to apply their farm skills to your farm business.