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Night 1
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Night 2
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Night 3
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Night 4
◦ Farm Business Performance Management
◦ Record-keeping
◦ Costs and Receipts
◦ Management accounts
◦ Profit and Cashflow
◦ Benchmarking
◦ Banking and Finance
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Introduction
What is Farm Business Management?
Business Goals and Objectives
Record Keeping
VAT – Rules, Rates, Records
Accounts – Profit and Loss, Balance Sheet
Tax Returns and Payments
Group Exercise
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What is farm business management?

What has to be managed?
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The control of farm resources (inputs)
to reach a goal (outputs)
Resources include:

Land

Labour

Capital, e.g.machinery, buildings, livestock,
feed, medicines etc.
Decision making
No Control
 Weather
 Concentrate Price
 Fertiliser Price
 Milk Price
 Regulations
Control
 Fertility
 Cow Genetics
 Forage
 System
Farmer = Manager
Typical Organisational Chart
Large businesses
Farmer?
M.D.
M.D.
Worker
Mechanic
Management
Builder
Plumber
Vet
Stockman
Manager
Workers
Book keeper
Goals
What do you want out of the business?
A decent
standard
of living
Education
for children
A healthy business
to pass on to next
generation
Top-class herd,
flock, crop
Provision for
retirement
Enough free
time to enjoy
life
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Goals are broad statements that show
where you want to be after some period of
time.
Objectives are the specific steps that must
be taken in order to reach goals.
Group Exercise
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Short term – goals that you would like to
accomplish within the next year
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Intermediate term – goals to accomplish within
one to 5 years
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Long term – goals that require more than 10
years to accomplish
What are your goals?
The Importance of Planning
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Farm Records
Why keep records?
 What records do I need to keep?
 What records are legally required?
 How long must they be kept?
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It’s the Law
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For VAT and Tax forms (HMRC)
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For measuring performance
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For making decisions;
◦ Details for management decisions: feeding,
breeding, culling, selection, purchases,
expansion, etc.
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Farm Records - Physical
There is a crossover between the Legal requirements,
FQAS, NAP, Cross Compliance and other schemes.
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Herd Records - Law
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Fertiliser used – Law, NAP Regulations
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Livestock feed supplies – Law, FSA, FQAS
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Veterinary Medicine records - Law
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Chemical / Pesticide records - Law
-
Births,
Deaths,
Movements,
Imports / Exports
Documents used to complete a tax return,
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Bank statements and cash transactions
Loan agreements
Credit card receipts
Sales and purchase invoices
Investments
Private expenses taken from account –
Personal Drawings
VAT accounts, import or export documents
Farm Records - Other
Personnel File
Wages
& National Insurance contributions etc.
Retention Period for Financial Records – 6 years after the
current year
Contract
& employee records
Retention Period – 7 years after employment ends
Health & Safety
Risk
Assessment reports, Accident Books
Retention Period – 12 years
Insurance
Employers
liability insurance certificates
Retention Period – 40 years
Group Exercise
What information needs to be recorded before
you can assess the performance of your own
farm?
Performance records/stock records
Information to record:
• Calving dates/ heat detection dates
• Individual cow records e.g. yield, no. of
mastitis cases
• Breeding and fertility details
• Livestock feed levels, weights
• Field and crop records
• ….
Used for Benchmarking
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Gross margin, ppl, £/cow, £/ha
Milk yield
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Milk composition
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Milk from forage and concentrate
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Fertility/calving interval
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Etc.
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All this information will help to create
benchmarking reports for the enterprise
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VAT is a tax added to the value of certain
goods (fertiliser) and services (auction fees).
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When certain goods and services are sold,
VAT is collected by those selling. This money
is then sent to HM Revenue and Customs
(HMRC)
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www.hmrc.gov.uk/vat/ for more information
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Must submit online
You usually submit a VAT Return to HMRC every 3
months.
The VAT Return records information for the
accounting period like:
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your total sales and purchases
the amount of VAT you owe
the amount of VAT you can reclaim
your VAT refund / payment
You must submit a VAT Return even if you have no
VAT to pay or reclaim.
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Goods and services can be classified into five VAT
groups:1. Standard rate - currently 20%
2. Reduced rate - currently 5%
3. Zero rate - this is not the same as exempt or
outside the scope of VAT (0%)
4. Exempt – no VAT but within the VAT system
5. Outside the scope of VAT
Vat Categories Summarised
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Financial Statements
◦ Profit & Loss Account
◦ Balance Sheet
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Almost all farmers are either Sole Traders or in a
Partnership and therefore are not required by law
to keep the above accounts, but it is normal
practice
Your accountant will advise
Adequate records are needed for completion of Self
Assessment tax return and VAT returns
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The Profit and Loss Account summarises
the financial transactions during the
accounting period (a year).
A measure of how well the business is
performing
Used to calculate the profit generated and
the tax due
TOTAL
INCOME
Sales
+
Subsidies
(including SFP)
+
Sundry receipts
-
Opening valuation
(livestock, crops, fodder,
feedstuffs and
goods in store)
COST OF
+
SALES
Purchases
–
Closing valuation
=
GROSS PROFIT
-
OVERHEADS OR FIXED COSTS
=
NET PROFIT
Sales
Milk Sales
Livestock Sales
Single Farm Payment
TOTAL INCOME
Cost of Sales
235,000
Opening stock valuation
Purchased feed
Dairy variable costs
Forage costs
Closing stock valuation
GROSS PROFIT
Fixed Costs
150,000
67,500
10,000
20,000
97,500
150,000
97,500
137,500
Power and machinery
Sundry overheads
Depreciation
Paid labour
Conacre
Bank charges / interest
NET PROFIT
200,000
20,000
15,000
32,000
10,000
19,000
12,000
8,000
6,000
87,000
50,500
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Shows the financial position of the farm
business.
Only valid on the day it is completed.
Shows what the farmer owns and what he owes.
The balance sheet lists:
 The ASSETS of the business – fixed and current.
 The LIABILITIES of the business – current and
long-term.
 How the business is FINANCED – its capital.
Value of Assets
Value of Liabilities
=
NET WORTH
LIABILITIES
ASSETS
Long/medium term liabilities
Mortgage
Hire purchase
Fixed assets
£55,000 24ha land @ £25,000
Machinery
and
£8,000
equipment
Breeding livestock
Merchant creditors
£40,000
£30,000
Current assets
Current liabilities
Overdraft
£600,000
£15,000 Store cattle
£4,000 Feed in store
NET WORTH
£610,500
TOTAL LIABILITIES
£692,500 TOTAL ASSETS
£20,000
£2,500
£692,500
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Tax must be paid on earnings and other
incomes
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You must file a tax return each year by;
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Your accountant can file the return for you or
you can do it yourself
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You must pay tax on profits
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HMRC will not wait for payment!
◦ 31st October by paper or
◦ 31st January online
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The current official HMRC tax year is from 6th April
2014 to 5th April 2015, although businesses can
have different tax years.
Tax rates:
◦ Everyone can earn £10,000 per year (Personal Allowance)
before tax is applied
◦ Pay 20% on remaining income up to a total of £41,865
◦ Higher rate of 40% from £41,866 to £150,000
◦ Additional rate 45% Over £150,000
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If the business is a Partnership, each partner has a
Personal Allowance
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Managing your business is crucial to
success.
Good financial and physical records are
needed to manage and plan properly.
Failing to plan is planning to fail!