Friday, March 29, 2024

Five things to check

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Always do your homework before signing any contract, Ashley Burdon, of accounting firm McIntyre Dick, says.
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This is especially the case when it comes to starting a sharemilking contract on a new farm.

“This is the big five things to check,” he told a South Island Dairy Event workshop, Your Financial WOF.

“Firstly there is the farm. What sort of order is it in, what is the past production, why is it doing this production?

“You need to put your feet on the farm, talk to the owners, talk to other people about it, talk to past sharemilkers on it. If there has been a high turnover of sharemilkers in past years find out why.”

He said second was the owners and good communication was the key to any business partnership.

“Be brave, have a real conversation with them and find out what type of people they are and whether you can do business with them.”

Third was the equipment needed for the position and understanding your ability to be able to fix things.

“If you don’t have some mechanical ability, try not to buy secondhand.”

Fourth was the monthly cashflow required, and lastly required compliance issues which included tax.

Even if there were many people applying for the position “the big five” still needed to be checked.

“You have to be honest and upfront about what you want and what you are doing and if you are not respected for doing that then you don’t want to be on that farm.”

Common pitfalls he had seen were sharemilkers changing plans without firstly talking to their accountant and their bank.

“Once you have locked down funding and if things change, such as if your tractor breaks down and needs replacing, you need to contact to your bank.”

Always comply with Inland Revenue rules, he said.

“Paying fines and penalties for late filing and paying taxes was dead money. If you are too busy during calving to do the GST then tell your accountant and they’ll do it. It’s better that you get help than ignore it. Inland Revenue won’t ignore it.”

He said poor financial record keeping was a common problem.

“If you need help then get it. If you are not actively reviewing actuals against budget then you don’t know if you are on track. If it’s not your cup of tea then ask someone else to help you with it.

“It doesn’t wash with me when people say they are no good with numbers. It’s a learned activity and anyone can do it and there are plenty of people to teach you.”

Mark Lankow, from ASB, said having a team behind you and using them was essential.

“Your team will be at the least your accountant and your banker and a mentor. You can get them all together if you want for meetings.”

He said sharemilkers should write down their game plan and stick to it.

“If you can show that this is what you planned to do and you have achieved it then you have a proven track record and that’s what a bank is looking for. You have to know your business inside out and show you have a passion for it, that you deserve a chance.”

The path to farm ownership was not easy and there were many ways to get there.

“But give it a crack, build a reputation and see what happens.”

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