Future Farmers Network directors regularly give their opinion on the latest news, events and issues in agriculture for an article for Australian Community Media. Here’s the most recent yarn from FFN Director Dan Coulthurst
Budget! The one word that can send the toughest of characters running for the hills and make the smartest of operators quiver in their boots.
Typically, people hate them.
Why? Well because many people would argue they're a waste of time; "I can't tell the future", "the minute you finish it, it's out of date", "I spend money when I need to spend money and I sell when I need money".
All these are valid arguments, however wouldn't it be nice to have more control over your finances, have an understanding of what you can spend or what you might need to make, be aware of what is going on with your money and be more proactive about financial decisions?
A simple budget can do exactly that.
A budget can be as in-depth as you would like it to be and done properly, will give you a very good understanding of your financial requirements over any given period.
The severity and intensity of your budgeting is tailored to you and your businesses needs as there is no one-size-fits-all model.
Budgets are not and should not be static documents.
They should be dynamic, referred to regularly, and most importantly, compared with your actual results.
It is one thing to put a budget down on a piece of paper, in a spreadsheet or in your accounting software.
However, if that budget is never opened again I would have to agree with all of the previous comments in that it will be a total waste of time.
Without regular updating, without comparing actual results to previous forecasts, and without stress testing the business, a budget is useless.
Budgets can also give you more ability to be dynamic with your management and give you a thorough understanding of your ability to weather the storm of any external factors.
Agriculture typically, no more so than now, is forever facing a multitude of challenges, most of which are outside of our control.
A good understanding of your financial position will place you better for making decisions, and allow you to be proactive in engaging your stakeholders about any potential disruptions.
Used appropriately budgets can be some of the most effective time spent working 'on your business' and can kick-start your operation to the next level.
It will save the pain of overspending, allow you to sell when you want to rather than when you have to, allow you to be more proactive with your money and reduce any nasty financial surprises.
There is strong correlation between an adequate level of financial literacy and a profitable farm.
So next time you consider putting a few figures together, I challenge you to not focus on the immediate burden or pain you may think it will cause, but more on the benefits your business will gain.
Future Farmers Network is keen to assist in the growth of financial literacy across, sign up to our weekly Top 5 email, keep an eye on our website and become a member to hear about upcoming events and tools in this area.