Where Will Your Business Finances be In Six Months’ Time?

We are now half way through the tax year for the majority of businesses (who have a March year-end). You know how much feed you have, or have not, and the quality of that feed.  You hopefully have fixed your feed price for the winter and forward bought your fertiliser. A lot of the larger costs in your business are fixed. Milk price has stabilised and looks set to remain where it is at least for the winter.

Even with much higher milk prices, cashflows are still tight for a lot of dairy businesses. Fertiliser is being ordered earlier due to uncertainty with supply next spring. It is costing at least double last year’s rates, with no deferred payment terms on offer. Rising costs of feed, plus the extra feed purchased because of the dry summer, fuel, machinery, contractors and general inflation have soaked up any of the extra milk price over the past six months.  If your business is overly exposed to variable interest rates then this will be a rising cost over the winter, but you can always budget worst case scenario and see where that leaves you for the remainder of the year.

With the above information to hand, it should be straight forward to budget with confidence for the remaining six months of this financial year.

This has the benefit of

1. Giving you confidence in making longer term decisions in the next six months.
2. It gives you 5-6 months warning on what the likely profit and thus tax liability will be in consultation with your accountant.
3. Helping you realise early what you thought was a problem, e.g. rising interest rates was a smaller problem, or conversely, a larger problem than initially anticipated.

In a time of uncertainty and volatility, it is all the more imperative you have a financial handle on your business, as well as the day-to-day physical knowledge.

Some businesses won’t find out until January ‘23 how their business performed financially to March ‘22 when their tax accounts are completed. Knowing with a high degree of confidence a year ahead of this for your business is a powerful management tool to taking advantage of opportunities and addressing weaknesses in your business.

A lot of the information required to budget is very accessible on software accounting programs which are a standard in most businesses nowadays. It’s a question of spending time extracting the historical data and putting it in the context of a forward budget for the next six months.

As one of my clients last week said following his annual accountant meeting….. “Thank you for the figures and printouts. It helped bring this years’ potential profits into focus for the accountant in terms of tax planning”.

To help put a budget together contact Gerard on 07976 426420
or e-mail gerardfinnan@fcgagric.com today and we can help.