Times are tough right now with inflation at a level not seen in the last 30 years, so it makes sense for business owners to be scrutinizing their costs to ensure they are getting the most value from every dollar spent. Accountants can be seen by some as an unnecessary drain on resources and they will shop around to find the cheapest they can. There has been an increase in the number of platforms offering tax filing services for very low costs without you having to lift a finger, such as Henry. Now please don’t think this is an article designed to bag these providers! They are a great solution for very simple businesses that have little to no complexity. The downside of these providers is that they may not offer business advisory services, such as answering questions like “what structure should I operate under”. This is where a great accountant really earns their keep.
Farming is particularly complex, where not only do you have to deal with tax and legal regulations, staff, and financial management, you also have to deal with the climate and the impact on the farming system. A wet winter or draught can have significant impacts on your cashflow and if you aren’t monitoring this you could find yourself in a very stressful situation. This is where a great accountant will be in regular contact with you to understand how the season is panning out and monitor the impact on cashflow so you can make proactive decisions. They can provide regular cashflow and profit and loss reporting and make recommendations to manage the situation.
A great accountant will know your business inside and out, and work with you to set goals along with a plan to achieve them. You may not like it, but they will hold you accountable to your goals, but also help you reassess if things aren’t going to plan. They can help you figure out what’s important.
Dairy farming is a fantastic industry for progression with a clearly defined pathway. The traditional farm worker, to contract milker to sharemilker, to farm owner offers a pathway to build on, even if you don’t follow that traditional model. Not many other industries have this pathway so its both a blessing and a curse. A curse in that with each next step adds another layer of complexity and makes the business structure a very important question from the start. If you don’t consider what your goals are for the next 10, 20 and 50 years you could end up with unintended side effects from operating under the wrong structure, most of which culminate in having to pay more tax. (Please see our article “What business structure should I operate under?” for more information). Again, this is where a great accountant comes in. They listen to you and consider your future plans, and recommend an appropriate structure based on your plans.
As you transition up the pathway from farm worker to farm owner you will inevitably need the help of a bank. In the past few years, the banks have gotten very strict with agricultural lending so its no longer acceptable to rock up and ask for a couple of hundred thousand without budgets, cashflows and stress tested scenarios. The average farmer may not have the skills or knowledge to produce these, and in a lot of cases they want the accountant to have checked them over as well. Not only will a great accountant be able to compile these for you, they also understand the bank lending system and what parameters to work on (such as milk price, interest rates, debt serviceability). A great accountant will be able to get this done for you at short notice, as is often the case when accepting a new sharemilking job. This gives credibility to you in the bank’s eyes.
Farming and business ownership is tough and can be extremely lonely sometimes. Having a great accountant who knows the struggles and has been there themselves, who can help you break the big problems into manageable chunks and keep your head in the game is someone you want on your team.