“And your risk profile changes with your age and your circumstances,” she said.
“When I was 25 I thought I was bulletproof, that nothing was going to go wrong and, if it did, I had nothing to lose anyway. When I was 35 that all started to change. Things could go wrong and they did and I had assets that I could lose.
“Talk to your business partners often about risk and make sure you understand what success means to them. It’s not always about making the most money.”
The Northland accountant, who owns a dairy farm in an equity partnership with her brother Shayne and was last year’s Dairy Woman of the Year, said regular meetings with business partners were important.
“But don’t do them at the end of the day when everyone is tired. I still get the most emails from my clients between 10pm and midnight and that shouldn’t be happening.”
Understanding everyone’s risk profile was also important when new opportunities came up.
“Buying the neighbour’s farm may not always be the right thing to do. But it can be hard to say no, too, especially when everyone including the real estate agent is saying yes to you.”
If buying the neighbour’s farm meant a change in farming practices, for example, from not employing staff to employing staff, taking on major debt or having to change farm systems then it had to be considered carefully because new skills would be required.
“It’s okay to say no to expansion.”
Financial statements were important but cash was always king and historical data was about what had happened – not what was happening now.
“Use your accounting software to its full extent, don’t just do the GST with it. Do variance reports, especially cashflows and actual versus budget and do it every month.
“Make it a habit and discuss the reports with your business partner after you produce them. Schedule those meetings in every month.
“If you are aware of what is happening then you can act to fix it.”
She said debt was not always a friend and was also part of the business risk profile.
“It has played a very big part in our industry recently but you have to be comfortable with your level of debt – it’s about whether you’re in control or the bank is. Who is managing what you are doing onfarm?”
She used to work out the bank interest for the farm daily.
“Then we knew, every day, how much we had already spent before we even started. It made us think about everything we did.”
Although interest rates were low farmers should realise interest payments at 6% on $22 of debt/kg milksolids (MS) were the same as 8% on $16.50 of debt/kg MS and 9% on $14.67 debt/kg MS.
“In good years, principal payments help you survive the low payout years and help future-proof your business for interest rate rises.”
When there were large year-to-year fluctuations in payout farmers should keep their accountants informed about what was happening onfarm in case provisional tax had to be recalculated.
“But always enjoy paying tax – it means you are making money.”
