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How does the financial plan for 2016 look?

Tuesday, 22 March 2016

We’re already three months into 2016 and have yet to see any recovery of the milk price. As a result, liquidity at most farms has been under pressure even longer. In most cases that means you need to review how your farm will make it through 2016. Ideally, you know what the effect of the ‘General order on the extent to which an activity is land-bound, land-based, or land-dependent’ is on your operational management. The phosphate rights will be introduced, but the precise effects of that are still unknown. But that doesn’t excuse you from making a plan. That means you have determined the optimum production scope for the farm in 2016 and what is feasible under normal conditions, thereby clarifying what the effect of the expected milk price is on the eventual liquidity for 2016.

If any shortfalls arise or continue to arise, they have to be resolved as satisfactorily as possible. In practice we often see that people first look to outside parties like the bank. Experience shows, however, that there are sufficient options for savings in operational management. We gave a good example of this on our client day. Critical examination of purchasing concentrate shows enormous savings can be realised.

The same is true for other areas in the operational management. It requires a critical look at your own management. Because you are so busy with the daily routine, such a critical look often gets skipped. Therefore it’s sensible to call in an external party for financial support. Someone who is independent and who can get an overall view of the operating processes. Such an external view should result in strengthening the business plan. The support when the plan is implemented is even more important. VIB financial’s Jan Hamming has this to say about it:

I often see farmers start the new year with a good plan. However, in implementing it they aren’t critical enough with respect to the operational management, so the plan is not achieved. Then if adjustments aren’t made in a timely manner, it can lead to difficult situations.’

Does this sound familiar or would you like more clarity on the financial options for your farm? If so, please contact Jan Hamming at  +31 (0)592- 614 265 or jhhamming@vibconsulting.nl