Starting your budget
3 min read
Budgeting for your dairy farm is all about planning your income and expenses. Remember to account for every source of income, such as milk and stock sales, and all outgoings, like farm expenses, loan repayments, and tax. You'll need accurate records to forecast future income and costs, and it helps to involve key partners in the process. Regularly update your budget to reflect any changes, and always involve your staff in discussions around spending. Also, don't overlook the expertise of rural professionals. They can offer insight into market trends and help you optimise your farm's productivity and profitability.
Before starting your budget it pays to gather and organise a few key things.
Budgeting is simply planning your cash income and expenditure, but do you know which key income sources and expenditure to include in your budget? This is the first step to starting your budget.
You will need to forecast:
You need accurate records, past annual accounts, cashbooks, bank account information, input from key partners and a budgeting tool.
Past annual accounts, cashbooks, bank account information
A budgeting tool
Input from key partners
Throughout the year you need to prepare, review and update your budgets: monthly, before your financial year starts or season begins, at season end and when change occurs.
Update and monitor actual income and expenses against what was forecast.
Prepare forecast annual and monthly cashflow budgets for the season ahead. Try to identify capital expenditure opportunities. Assess the impact of purchasing decisions by preparing a business case to determine which items will have the best return on investment (ROI) and prioritising purchases based on any compliance requirements.
Compare actual to forecast figures for the season finishing, use these to inform your forecast budgets and farm management plans for the next season. This is also a good time to review key performance indicators.
Engage your staff and other key stakeholders in relevant parts of your budgeting process. Be transparent about expenditure levels and ask for ideas on how to make cost-effective decisions.
Working in a business inevitably means working with other people who will have direct and indirect influences on how your business performs and how well (or poorly) you are able to stick to your budget and achieve business goals.
It may be useful to develop a farm finance policy staff have access to and ensure they understand spending decisions, delegated authority and desired outcomes.
Sensitivity analyses are also an important stakeholder communication tool.
Take advantage of the rural professionals who support your business (banker, Chartered Accountant, farm management consultant, veterinarian, supply store staff, and company representatives). They can provide you with a range of valuable information on market trends, input costs, and general advice on how to fine-tune your business to be productive and profitable.