Focus on farming: Looking after yourself, your farm, and your finances

This article is the latest in our series focused on helping to address the pressures faced by farmers in a challenging economic climate. For previous articles, see our piece on the Income Equalisation Scheme and read our seven tips to help tackle financial challenges on-farm.

There is - rightfully - a lot being written right now about our challenging market context for farmers. So what levers can farmers pull to help address some of these financial pressures and associated negative wellbeing?

In the 14 September Rural Issues Debate it was noted that farmer confidence is at record lows. The cost-of-farming crisis, rising interest rates, falling commodity prices, and a long list of new regulations are adding extra pressure for farming families.

There’s a Billy Ocean song ‘When the Going Gets Tough, the Tough Get Going’, and while this isn’t the perfect analogy, it does have relevance. New Zealand farming families know from experience that when things get tough, they can knuckle down. Farm communities are prepared to work hard and draw on all the available knowledge and resources to ride through the hard times. And while the road ahead may be uncertain, there are learnings from past experiences that the agribusiness community can take into the future.  

Sometimes you need to look back to look forward

Sir Bill English gave a keynote address at our recent BDO conference.

 Two key points resonated:

  • Firstly, the expectation is that New Zealand will need to grind its way out of the current economic outlook. It won’t be a quick bounce-back.
  • Secondly, if we think back to COVID-19 and its impact on the economy, there was a lot of financial support available in the form of COVID-19 subsidies. It’s unlikely this same support will be available again - the pot is empty.

Sir Bill also noted:

  • Good performers do well in a grind.
  • Poor performers often get ground down (they need the most support).
  • Leadership in times like this requires conviction.
  • Focus on a few things and execute well.

Focusing on your wellbeing

The recent Mental Health Awareness Week gave us a moment to reflect on our wellbeing, which is especially important for the farm community. The Mental Health Foundation of New Zealand has some valuable resources to support farmers and their workforce, as does the Rural Support Trust and First Steps.

These ‘Five Ways to Wellbeing’ tips from the Mental Health Foundation are a great starting point:

  • Take notice: Take a moment to acknowledge what’s happening in the present moment.
  • Give: Carrying out acts of kindness boosts happiness and wellbeing.
  • Be active: Farmers are active people - that’s the nature of the job - but try to be active off the farm too.
  • Connect: This is at the heart of wellbeing.
  • Keep learning: Exercise the mind as well as the body.

Here’s a more detailed overview of the practical steps you can take to look after yourself:

1. Let’s start with the most important thing: you, your family, and your people.

Farms are no different than most businesses - people’s wellbeing should be front of mind. The Rural Support Trust helps the rural community with a range of situations, and at BDO we’ve seen how the trust supports farmers during tough times.

Whatever the situation, don't be afraid to reach out, whether that’s to your farm adviser, local Rural Support Trust, banker, or even your accountant - we are good listeners.

2. Control what you can control. You have the skills and the required circle of resources to do that.

3. Communication is key. This should be with your family, your people, your bank, and your advisers. But it doesn’t end there. Reach out to your neighbour and your local community. Put wellbeing on your local farm discussion group’s agenda to give everyone a safe space to open up.


Finance and farm management tips

Finances are the leading cause of negative wellbeing among New Zealand Business leaders, according to our BDO Wellbeing & Business Performance Index. Here’s what you can do to help stay in control of your finances:

1. Communication should extend to your bank as well. This will mean:

  • Keeping them up to date with financial information, either by GST return period or quarterly updates.
  • Providing and discussing scenario options.
  • Discussing options with existing debt.

2. If you have livestock, look after your stock, and monitor those extra costs and inputs that are directly related to attaining outputs. Are you getting maximum value for money?

3. Know your financials. This is where looking back to look forward can help.

  • Many of you have farmed through peaks and troughs before and will have adjusted spending accordingly. Now you need to determine what an average achievable budget looks like – something longer-term, not just ‘keeping the lights on’.
  • Have you reviewed and updated forecasts for commodity price variations, newly released schedule changes, and any interest rate changes depending on the structure of your debt?
  • Have you looked at adding different scenario options to your forecast to support decision making?
  • Today’s software makes things easier than in the past. Figured, Farm Focus and Xero are just a few great combinations to consider. If you have these, investigate whether you’re fully utilising them. Expect cash loss but monitor the balance sheet.
  • MPI’s Farm Debt Mediation Scheme is designed to help financially distressed farmers by providing an independent, constructive, and timely process for them to work through debt problems with creditors. Consider whether this might be of help to you.
  • Look closely at your discretionary spend or even capital spend. Do you need it, or do you want it?
  • Monitor and review average annual personal expenditure - but don’t forget that a discretionary spend on a family treat can also be money well spent. Take off that one-off cost that may have occurred or add in what you know is coming.

4. Keep on top of your legislative obligations.

  • Do keep up to date with all the legislative, tax requirements and filing obligations.
  • If you’re struggling to pay any of those taxes, we can assist with communication and liaison with IRD on any required tax arrangements.

For more information and advice on your navigating finances in your farming business, please reach out to your adviser or the BDO Agribusiness team