For any business, managing your cash flow can be a challenge at the best of times. For the farming community who have had to endure a long arduous winter this challenge must feel quite daunting right now.
Here are 5 things to consider as you plan for the year ahead.
- Reduce and control living expenses by taking a set amount each week/month.
- Set up a monthly payment plan with your suppliers for large outstanding bills (contractor, vet, accountant etc.) Remember they will have cash flow problems too when farmers are in difficulty but you still need their services.
- Talk to your bank about short-term cash flow solutions. Many banks offer a short term facility to pay your insurance premiums, income tax liabilities, rates, accountancy fees over a 11 month period (usually with a minimum amount required) at a fixed rate of interest.
- Talk to your bank about deferring upcoming loan repayments.
- Talk to your accountant about your tax liabilities. Remember your income tax liability for 2017 will be due in October together with preliminary tax for 2018.
The challenges and knock on effects of the long winter will reduce the level of profit for farmers this year. There is a difference between farm profit and available cash flow to meet ongoing costs and loan repayments. The available farm profit in any year has to be used against farmers living expenses, tax and existing farm loan repayments.
At this point in the year farmers should plan out expenditure and income for the year ahead, which will help identify if you need support during the year. You should take into account predicted output prices, costs and living expenses. A useful tool would be to look at previous years accounts and compare present milk prices/output with previous year prices.
With your plan completed it will be obvious if you will have cash flow problems during the year. Now is the time to take action and identify how you can rectify the problem. Consider the 5 suggestions we highlighted earlier.
For farmers who are on income averaging there is the option to defer income averaging where profits are lower for a year, and to spread the deferred payment over the following 4 year period. However this opt-out can only be done once every five years.
If you are not in a position to pay your income tax liability in October, please contact your accountant early, they may be able to assist setting up an arrangement with revenue.
The above points are a few points to note, if you wish to discuss any of the above points as well as other farm taxation issues please contact James Byrne or Marie Kelly on 022-21047 or by email (email@example.com & firstname.lastname@example.org).