Financial Stress and Risk Mitigation

FINANCIAL STRESS AND RISK MITIGATION

A lot has been said and written on this topic. Bankers, DNZ representatives, fertilizer representatives and all associated with the dairy farming industry have been briefed on this matter. Some of the key issues that I see to reduce stress are as follows :

• The Banks budget should not be your budget! They are bulk money lenders and if there is heaps of security they may well lend when it is obvious your debt is too high to effectively service the debt.
• Do not over state production and under estimate your costs. It is fatal.
• Do take a realistic view on all matters pertaining to your business.
• Avoid hire purchase like the plague. Yes, you can justify a new tractor and yes a new one might make you feel a bit better for a couple of months, but once the monthly drag of HP payments start the euphoric feeling soon passes.
• Go floating on all loans where possible. Try to get all your debt into one big loan. Staggered fixed loan amounts put the bank in control.(I recently saw $3,000,000 fixed until 2017!At 7.35% Oh the pain).
• Watch out for snakey oil sales people. They make commission on sales of product to you claiming all sorts of benefits to your business.
• Stick to the basics. Realistic stocking rate maximising production from minimal inputs and cost. Run your business parallel to your budget.
• Ensure your wife is your new best friend and look after her. It will be she who talks to you in the middle of the night when it is rough, not your mates.
• Call a business meeting, get a facilitator and go through Assets and Liabilities, your historic financial performance and your budget. Include ALL stakeholders, bankers, insurance broker, accountant, consultant and so on. Get them focussed on your business for a day. It will pay huge dividends.
• If you are terminal, take great advice and accept it. There is no point in staying in the high dependency ward. I have seen some tragic cases of people holding on when it is clear their business is incurable. This has included broken marriages, bankruptcy, receiverships and cancer!
• Try to somehow maintain some outside interests and get off the farm on a regular basis.
• If you go to the pub you are likely to find a whole lot of farmers with exactly the same problems.
  
  In summary
  
  Get a realistic view on yourself and your business. Avoid non-essential expenditure if you are under pressure. Look after your best friend and keep talking to your professionals.
  
  Finally, avoid a catastrophe as its effects will plague you for years to come if not your whole life. It is not easy out there.
  
  Disclaimer – These are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.
  
  Don Fraser is the Principal of Fraser Farm Finance and a consultant to the Farming Industry.
  Contact him on 0800 777 675 or 021 777 675. A disclosure document is available on request.