Cash-flow in farms

    Nuturing cash-flow

    Farmers should plan now to tackle potential future problems with cash-flow.

    Farmers facing current cash-flow problems and concerns about the impact on future cash requirements of the 2013 harvest are advised to plan now to minimise problems later in the year. After last year’s disappointing harvest, and poor crop establishment and a challenging spring this year, Rory Galloway of Savills Brechin urges farmers to review their options ahead of the harvest.

    ‘Budgets and cash-flow, like crops and livestock, need attention and constant review,’ he says. ‘An expensive winter for livestock producers, and dramatic changes to cropping plans for arable, mean that now is the best time to plan ahead and consider various money-saving ploys.’

    These ploys might include:

    • Managing capital costs. Replacement costs for significant pieces of kit often comes as a shock; consider deferring, using a contractor or even becoming a contractor.
    • Reviewing planned investments. An annual investment allowance of £250,000 is only worth using to offset tax if the profit has been made in the first place.
    • Renegotiating repayment timings on machinery purchases. Providers are generally flexible, but habitual offenders will find it harder to make changes.
    • Watching fertilizer prices. There are some keen terms for early orders and deferred payment terms are likely to be more common than in recent times.
    • Capitalising on grain prices. Although many growers are understandably wary of early commitments (which caught them out on both price and yield last year), current prices are still historically high for the time of year and do not look bad — taking some cover looks prudent.
    • Delaying drastic changes to systems and structures. Unless forced, it’s probably not the time to make major restructurings, although the sale of off-lying land parcels could be the answer for some. Do watch capital gains tax implications, though.
    • Being aware of the tax implications of selling machinery to restructure — tax liabilities feed into cash flow.
     
     

    Key contacts

    Rory Galloway

    Rory Galloway

    Director
    Rural

    Savills Aberdeen

    +44 (0) 1224 971 118

    +44 (0) 1224 971 118