Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Farmers need to be bank ready

28/07/2016

Farmers need to be bank ready


With the dairy pay out remaining stubbornly low and equity positions becoming more precarious many farmers are seeing more of their bank manager, according to Crowe Horwath’s Head of Corporate Agribusiness, Hayden Dillon.

Dillon is quick to point out that this increased level of contact isn’t always a bad thing and proactive discussions between banker and farmer are an important step to take in dealing with the current financial pressures both parties are facing.

However, it can be intimidating for some and a recent Federated Farmers’ survey found that one in ten farmers were feeling an ‘undue’ level of pressure from their bank.

Dillon stresses that a key factor for a successful banking relationship during these challenging times for the dairy sector is being well prepared with all the relevant information, ‘being bank ready’ as he calls it.

Dillon encourages farmers to take ownership of the relationship and says he has seen too many bury their heads in the sand and keep dealing with the day-to-day farming jobs, often too scared to look at the bigger picture.

Dillon points out that it’s a risky game. “We know banks are being asked to fund another year of losses in many cases. They determine funding by assessing the risk profile of the individuals or business they are lending to. Farmers need to provide them with accurate information to form a clear picture of the farm’s position and the confidence they have a plan to get through this.”

“While there are a lot of risk factors beyond their control, such as the state of the industry, commodity prices, exchange rates and climatic conditions, there are plenty of risks farmers can mitigate against and thus help control their risk profile or at least provide their bank manager with some comfort,” adds Dillon.

“Farmers need to take ownership of the risk factors they can control, and in a financial sense to do this they need to have an accurate picture of where the business sits in real time,” Dillon says.

In what can be a rapidly changing market filled with a level of uncertainty, real-time information has become crucial; however, Dillon says in many cases farmers can be presenting their bank with information from 15 months ago, which has become of little use for decision making.

“Real-time cash flow analysis, forecasting and budgeting are vital in today’s modern farming business. As things change farmers need to continually adapt their planning, allowing them to mitigate financial risk factors, control costs and make effective business decisions in a timely manner,” Dillon adds.

This is where farmers can look to their support team for help, says Dillon. “They should consult their bank manager, business advisor or even an advisory board member to help pull out and make sense of the information they need.”

“Farmers should challenge their advisors for help with budgets and forecasting and if they need to they should bring them to their bank meetings for support,” states Dillon.

Banks do not want to see farmers out of business, but they do require them to work closely with their bank manager and keep them updated. Dillon also adds, “If your first plan does not work out, make sure you have a back-up plan. This could mean getting more equity from shareholders or selling a run-off block. Everyone will have a different plan, but regardless of what it is, everyone does need to have one.”
ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Commerce Commission: Latest Broadband Report Confirms Improved Performance Of Premium Fibre Plans

The latest report from the Commerce Commission’s Measuring Broadband New Zealand programme shows that the performance of Fibre Max plans has improved substantially. This follows a collaboration between the Commission, its independent testing partner, ... More>>

Air New Zealand: Capital Raise Deferred

Air New Zealand has decided to defer its planned capital raise to later in 2021 allowing more time to assess the impacts of recent developments on the airline’s path to recovery. 'We’ve seen some clearing of COVID-19 clouds recently, with ... More>>

Commerce Commission: Cartel Conduct Now Punishable By Up To 7 Years’ Jail Time

Cartel conduct can now be punished with a term of imprisonment of up to 7 years, after the Commerce (Criminalisation of Cartels) Amendment Act 2019 came into effect today. Cartel conduct includes price fixing, market allocation and bid rigging (see ... More>>

Stats NZ: Auckland Population May Hit 2 Million In Early 2030s

Auckland’s population may rise from about 1.7 million currently to 2 million by early next decade, Stats NZ said today. “Auckland will likely have the highest average annual growth of New Zealand’s 16 regions over the next 30 years, from ... More>>


Stats NZ: New Report Shows Impact Of Demands On Land In New Zealand

A new environmental report released today by the Ministry for the Environment and Stats NZ, presents new data on New Zealand’s land cover, soil quality, and land fragmentation. The land cover data in the report, Our land 2021 , provides the most ... More>>

ALSO:

Stats NZ: March Card Spending Rebounds Despite COVID

There was a lift in retail card spending in March following a fall in the lockdown-disrupted February month, Stats NZ said today. Seasonally adjusted retail card spending rose by $53 million (0.9 percent), compared with February 2021. Visit our website to read ... More>>

PwC: Outcome Of Review Into Air New Zealand Gas Turbines Business

Air New Zealand has received the report into its Gas Turbines business from independent external advisers PwC. Air New Zealand Chairman Dame Therese Walsh says the report identified a range of effective controls in the Gas Turbines revenue contracting ... More>>