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2.  Recap on last week  Cash and Profit  Benchmarking  Assessment 2

3.  Previous Session: ◦ Be able to calculate gross margins and net margins for an enterprise ◦ Know how to categorise receipts and expenditure for an enterprise  Enterprises  Costs (Variable, Fixed, Capital)  Depreciation  Receipts (Enterprise, Sundry, Capital)  Margins (Gross and Net)  Cash – Can you pay your bills?  Profit – Can you fund private drawings and business growth? 3

4. Cashflow Budget  Planning A forecast of money going into and out of a business over a specific period of time  Control Compare actual payments with expected 4

5. Layout of a Cash Flow Budget 5

6. 6

7. Overdraft not being repaid 7

8. 8

9. 9

10.  Not reinvesting in the business or selling assets  Low drawings ◦ Off farm income reducing the need for drawings to fund family expenses  Borrowing money  Not paying bills 10

11.  An expanding business with increasing assets, but few sales  High withdrawals for family living  Repaying debt rapidly  Buying next year’s inputs from this years cash ◦ e.g. prepay on fertiliser  Increase in creditors ◦ have not been paid yet for product sold 11

12.  Vital to plan and review bank borrowing  A means of adjusting the timing of payments and income  Shows if it is feasible to continue or develop the farm business 12

13.  How financially viable is the farm business?  What information do you use to make management decisions?  Individual enterprise performance  BENCHMARKING is a tool to assess performance 13

14. CASHPROFIT ££ Sales+150,000Sales+150,000 Variable costs-75,000Variable costs-75,000 Business overheads-30,000Business overheads-30,000 Telephone bill-3,000Telephone bill (2/3rds to farm) -2,000 Machinery purchased (no loan) -50,000Depreciation (buildings & machinery) -15,000 Drawings & tax paid-20,000 CASH SURPLUS/ DEFICIT (after drawings & tax) -£28,000PROFIT£28,000 14

15.  Purpose of tax accounts - to calculate the farm business profit, which determines the amount of tax due  Purpose of management accounts – to measure efficiency of individual farm enterprises and whole farm  Neither tax or management accounts include VAT 15

16. “Helps farmers to assess their own business performance and compare their physical and financial results with other similar farms” 16

17.  Collect data  Analyse data  Compare your results  Identify reasons for variation  *Formulate action plan*  *Implement plan* 17

18.  Enterprise reports on Physical performance ◦ Look at individual enterprises  Enterprise reports on Financial performance ◦ Look at individual enterprise but can build to a whole farm report – based on profit not cash 18

19.  Output  Variable costs ◦ Costs associated with production that vary depending on scale  Gross margin – (Output – Variable costs) ◦ how efficient you are with raw materials needed for the enterprise ◦ e.g., feed, fertiliser, vet & med and other variable costs  Overhead Costs – costs that do not vary with scale ◦ looking at the whole business. What is needed after variable costs. The biggest variation between farms is the amount spent on overhead costs  Gross Margin – Overhead costs = Net Margin (Profit) 19

20.  Group Exercise – Enterprise specific  4 or 5 key performance indicators for ◦ Physical performance ◦ Financial Performance  Include some figures about what good performance might be 20

21. Physical performance is a measure of the quantity and quality of what you produce on your farm. These will differ between enterprises, e.g.: ◦ Average milk yield/cow ◦ Butterfat and Protein percentage ◦ Calving interval ◦ Average meal fed/cow ◦ Stocking rate/ha ◦ Lambs born alive/ewe ◦ Kg liveweight/ha 21

22.  Financial performance is a measure of the costs of production in relation to the value of output.  Financial performance is broken down into output, variable costs, overhead costs and capital costs.  These will produce various performance indicators e.g.: ◦ Individual costs /cow ◦ Gross margin/cow ◦ Gross margin/ha ◦ Total overhead costs ◦ Overhead costs/cow 22

23.  Farmer records data throughout the year  Data Collector gathers data once per year  Data processed  Reports generated and delivered  Local adviser helps interpret report and plan for change 23

24. Suckler - Beef2 years ago1 year agoThis year 2013/2014Average allTop 10% Accounts£/Head £/Kg£/Head Output Sales8161,2971,2173.579361,116 Replacement Costs23-29870.25-2424 Total Output9621,1851,2913.799431,196 Variable Costs Forage Costs1181071870.54174129 Concentrates Costs821381790.52194169 Vet/Medicine6362710.205147 A.I. Fees25110.03410 Sundry Costs2872770.224240 Total Variable Costs2923845251.51465394 Gross Margin6708017662.28478801 Overhead Costs Machinery depreciation014 0.039163 Machinery running costs6942300.0810283 Fuel costs042460.135031 Contractor charges5965900.268243 Building depreciation1420 0.055052 Property repairs2117270.074022 Electricity11220.0065 Water & Rates4019250.071513 Business admin costs1820180.034135 Miscellaneous Costs1214280.081421 Total common overhead costs2442563000.80492368 Total common costs5376408242.31957762 Net Margin4265454661.37-14433 Paid Labour63100.02169 Conacre12000.007065 Finance0000.0058 Total Overhead Costs*2632593090.82583450 Total Costs*5326737462.191,072820 Net Profit*4075414571.46-105352 24

25. Simplified Financial Report 25 Suckler-Beef Report 2013/2014 FINANCIAL Performance 2013/2014Average £/Head Output Sales1,3901000 Less Replacements-10-30 Total Output1,380970 Variable Costs Forage Costs200170 Concentrates180200 Vet/Medicine5040 Breeding Costs105 Other Costs6040 Total Variable Costs500455 Gross Margin880515 Overhead Costs Machinery and building depreciation240160 Machinery running and contractor costs250240 Property repairs8055 Electricity, Water Rates3025 Business admin costs3015 Paid Labour3015 Conacre1045 Finance1015 Other Costs2015 Total Overhead Costs700585 Net Margin180-70

26. Suckler-Beef Report 2013/2014 FINANCIAL Performance 2013/2014Average £/Head Output Sales1,3901000 Less Replacements-10-30 Total Output1,380970 Variable Costs Forage Costs200170 Concentrates180200 Vet/Medicine5040 Breeding Costs105 Other Costs6040 Total Variable Costs500455 Gross Margin880515 Gross Margin 26

27. Overhead Costs Machinery and building depreciation240160 Machinery running and contractor costs250240 Property repairs8055 Electricity, Water Rates3025 Business admin costs3015 Paid Labour3015 Conacre1045 Finance1015 Other Costs2015 Total Overhead Costs700585 Net Margin180-70 Net Margin  No family labour included 27

28. Simplified Physical Report 28 PHYSICAL Performance This year 2013/2014 Average Average number of Suckler Cows6045 Average Weight of Steers Sold (kg)560550 Average Weight of Heifers Sold (kg)520540 Average Weight of Bulls Sold (kg)620600 Concentrates fed/Cow (kg)820880 % EUR between Fat class 3 and 48550 Calves/Cow/Year1.01 DLWG of Steers (kg/D)0.850.75 DLWG of Heifers (kg/D)0.790.72 DLWG of Bulls (kg/D)1.30.80 Liveweight Produced Per Ha (Kg)750460

29. Suckler - Beef2 years ago1 year agoThis year 2013/2014Average allTop 10% Accounts£/Head £/Kg£/Head Output Sales8161,2971,2173.579361,116 Replacement Costs23-29870.25-2424 Total Output9621,1851,2913.799431,196 Variable Costs Forage Costs1181071870.54174129 Concentrates Costs821381790.52194169 Vet/Medicine6362710.205147 A.I. Fees25110.03410 Sundry Costs2872770.224240 Total Variable Costs2923845251.51465394 Gross Margin6708017662.28478801 Overhead Costs Machinery depreciation014 0.039163 Machinery running costs6942300.0810283 Fuel costs042460.135031 Contractor charges5965900.268243 Building depreciation1420 0.055052 Property repairs2117270.074022 Electricity11220.0065 Water & Rates4019250.071513 Business admin costs1820180.034135 Miscellaneous Costs1214280.081421 Total common overhead costs2442563000.80492368 Total common costs5376408242.31957762 Net Margin4265454661.37-14433 Paid Labour63100.02169 Conacre12000.007065 Finance0000.0058 Total Overhead Costs*2632593090.82583450 Total Costs*5326737462.191,072820 Net Profit*4075414571.46-105352 29

30. Simplified Financial Report 30 Suckler-Beef Report 2013/2014 FINANCIAL Performance 2013/2014Average £/Head Output Sales1,3901000 Less Replacements-10-30 Total Output1,380970 Variable Costs Forage Costs200170 Concentrates180200 Vet/Medicine5040 Breeding Costs105 Other Costs6040 Total Variable Costs500455 Gross Margin880515 Overhead Costs Machinery and building depreciation240160 Machinery running and contractor costs250240 Property repairs8055 Electricity, Water Rates3025 Business admin costs3015 Paid Labour3015 Conacre1045 Finance1015 Other Costs2015 Total Overhead Costs700585 Net Margin180-70

31. Suckler-Beef Report 2013/2014 FINANCIAL Performance 2013/2014Average £/Head Output Sales1,3901000 Less Replacements-10-30 Total Output1,380970 Variable Costs Forage Costs200170 Concentrates180200 Vet/Medicine5040 Breeding Costs105 Other Costs6040 Total Variable Costs500455 Gross Margin880515 Gross Margin 31

32. Overhead Costs Machinery and building depreciation240160 Machinery running and contractor costs250240 Property repairs8055 Electricity, Water Rates3025 Business admin costs3015 Paid Labour3015 Conacre1045 Finance1015 Other Costs2015 Total Overhead Costs700585 Net Margin180-70 Net Margin  No family labour included 32

33. Simplified Physical Report 33 PHYSICAL Performance This year 2013/2014 Average Average number of Suckler Cows6045 Average Weight of Steers Sold (kg)560550 Average Weight of Heifers Sold (kg)520540 Average Weight of Bulls Sold (kg)620600 Concentrates fed/Cow (kg)820880 % EUR between Fat class 3 and 48550 Calves/Cow/Year1.01 DLWG of Steers (kg/D)0.850.75 DLWG of Heifers (kg/D)0.790.72 DLWG of Bulls (kg/D)1.30.80 Liveweight Produced Per Ha (Kg)750460

34. Sheep2 years ago1 year agoThis year 2013/2014Average all Accounts£/Ewe £/kg carcase£/Ewe Output Average Lamb Sales137110 3.11105 Wool sales3220.052 Replacement Costs-22-20-22-0.61-15 Total Output11792902.5593 Variable Costs Forage Costs1618230.6420 Concentrates Costs1320240.6719 Vet/Medicine910120.348 Sundry Costs4680.228 Total Variable Costs4454671.8755 Gross Margin7337230.6837 Overhead Costs Machinery depreciation1311100.298 Machinery running costs8940.1110 Fuel costs0070.194 Contractor charges6690.256 Building depreciation1110.024 Property repairs10960.164 Electricity1110.021 Water & Rates1110.041 Business admin costs2340.094 Miscellaneous Costs0010.021 Total common overhead costs4340441.1941 Total common costs87951113.0696 Net Margin30-3-20-0.57-3 Paid Labour4430.072 Conacre4400.006 Finance0000.000 Total Overhead Costs*5149471.2649 Total Costs*1171231353.82119 Net Profit*22-12-23-0.58-11 34

35. Simplified Financial Report 35 Sheep report 2013/2014 FINANCIAL Performance 2013/2014Average all £/Ewe Output Average lamb sales141115 Wool sales43 Replacement costs-10-14 Total Output135104 Variable Costs Forage Costs2015 Concentrates Costs518 Vet/Medicine1210 Sundry Costs98 Total Variable Costs4651 Gross Margin8953 Overhead Costs Machinery and building depreciation 812 Machinery running and contractor costs 1310 Property repairs 33 Electricity, water rates 12 Business admin costs 34 Paid labour 51 Conacre 22 Finance 21 Other costs 13 Total Overhead Costs38 Net Margin5015

36. Sheep report 2013/2014 FINANCIAL Performance 2013/2014Average all £/Ewe Output Average lamb sales141115 Wool sales43 Replacement costs-10-14 Total Output135104 Variable Costs Forage Costs2015 Concentrates Costs518 Vet/Medicine1210 Sundry Costs98 Total Variable Costs4651 Gross Margin8953 Gross Margin 36

37. Overhead Costs Machinery and building depreciation 812 Machinery running and contractor costs 1310 Property repairs 33 Electricity, water rates 12 Business admin costs 34 Paid labour 51 Conacre 22 Finance 21 Other costs 13 Total Overhead Costs38 Net Margin5015 Net Margin  No family labour included 37

38. Simplified Physical Report 38 Physical performance This year 2013/2014 Average all Average Sheep Numbers 250165 Lambs Sold or Weaned/Ewe 1.701.30 Concentrates Fed/Ewe (Kg) 4575 Carcase weight of lambs (Kg) 2119.5 % Stored lambs 015 % Fat Lambs 8072 % Replacement Lambs 2015 Carcase weight produced per /ha (Kg) 450210

39.  Discuss the benchmark report  Compare to average figures  What are the positives?  What are the negatives?  What could be improved? 39

40. Assess your own current performance Allocate ALL production costs Gross margin is a good starting point Control overhead costs Identify strengths and weaknesses Feeds into whole farm management accounts Information for farm planning and decision making 40

41.  A process to help farmers assess their own business performance ◦ Physical performance ◦ Financial performance  Benchmarking will identify areas for improvement  No action, No benefit 41

42. Wheat Barley Cattle Existing land Total Farm Profit Gross margin 42

43. Less Gross margin Wheat Barley Sheep/ Cattle Existing land Overheads Profit Total Farm Gross Margin = 43

44. Wheat Barley Cattle Existing land ( 1 ) Total Farm Profit =Less Gross margin Overheads Profit 44

45. Wheat Barley Cattle Existing land ( 1 ) ( 2 ) Total Farm Profit =Less Gross margin Overheads Profit 45

46. Wheat Barley Cattle Existing land ( 1 ) ( 3 ) Total Farm Profit =Less Gross margin Overheads Profit ( 2 ) 46

47. + = Wheat Barley Cattle Existing land Other income ( 1 ) ( 3 )( 4 ) Total Farm Profit Less Gross margin Overheads Profit ( 2 ) 47