Plan now for the winter cash squeeze

Farm incomes are under pressure in almost every sector, and with likely delays to the Basic Payment Scheme the next six months are going to be critical. People need to draw up accurate cash flow forecasts to understand where the tight periods are going to be and act early to overcome them.

If you delay supplier payments ensure they understand that it’s a temporary measure, and pay little and often rather than not at all. Banks will generally look favourably on a business that has been well managed in the past and has a reasonable track record. You need to have robust cash flow forecasts to explain your needs, and give them plenty of notice to obtain the best rates. Anyone turned down by their bank should ask why, and explore whether their planned budgets are realistic and accurate.

The cheapest borrowing will probably be to extend overdrafts or loans. Other options could be to refinance machinery with secondary hire purchase agreements, bring in funds from outside the business, or take advance payment on grain sold forward into pools. In some cases it may even be worth selling off some assets or a bit of land to free up working capital.

If you’re finalising March 2015 year-ends look at ways to minimise tax liabilities, perhaps by reducing payments on account. But if you need to extend bank borrowings have one eye on profit levels – you want to present a robust picture of the business to your bank manager. If you have low levels of profit, perhaps through high repair expenditure, make a note of that to explain why. The key is forward planning and open dialogue. Working with your accountants and advisers presents a united front to lenders, and can help flag up strategic options for the business.

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