I totally understand that when you are in the midst of a full-blown drought, just focusing on surviving day to day, is all most people can realistically handle. The stark reality is that the long-term success of your (agri)business is heavily reliant on making sure that you financially survive the drought, and to do that you need to make good financial decisions.
You want to be in the best possible shape financially when the drought ends to ensure you can recover and get back on deck. This is not easy in anyone’s book, however, here are five small things that I reckon might help to improve your chances of enduring and recovering successfully:
Keep your bank manager up to date at all times: You would think that when you are finding it hard to pay your loans, that you would avoid your bank like the plague. In my experience, when you keep your bank manager up to date, the bank is much more likely to support you through the tough times. You want to know your lending limits and how much they will support you as early as possible, that way you can be prepared and have a backup plan ready to go. The ideal time to speak to them is well before you start struggling, however the next best time is right now.
Visit your accountant: The impact of having to pay last year’s tax in the midst of a drought, when you may not be making money, is a double whammy. If you have an accumulated tax bill or last year’s tax bill is due, discuss with your accountant whether you should request a payment plan from the ATO. This can help massively with cashflow and the ATO is normally very receptive in a drought. As with banks, it is much easier to negotiate with the ATO if you contact them before they contact you.
Review your off-farm assets: If you have any off farm assets, such as shares, Farm Management Deposits (FMD’s), Property etc, work out how to sell part or all of the asset as a last resort. Remember to get advice from your accountant, bank manager or financial adviser before taking any action, to determine any short or long term implications of selling example tax, selling costs and loan security issues.
If you are a grazier, consider getting the advice of a good animal nutritionist: Nothing stings more than spending good money on feed and supplements which actually turn out to be nutritionally deficient. Low conception and birth rates in the herd are expensive and will financially prolong the drought for many years past its end. My Dad is a grazier in north west NSW and when we spoke last night, he effectively said, “Your Mum and I need to protect our herd (the asset) and the progeny (his future cashflow) at all costs.”
Stay mentally strong: As my grandfather always says, “If it doesn’t rain by Christmas, I bet it will rain sometime after”. The drought will end and focusing your mind on this fact is critical to be able to endure. If you are not coping, ask for help. If someone you know is not coping, ask ‘are you ok’ and offer help. Whilst I appreciate that it is easier said than done, working on being mentally strong will help you make better financial decisions and gives you the best chance of success. It is amazing how even little thing can make a difference when things are tough. Hopefully these five small suggestions will help you make great financial decisions and endure.
*Ben Law is an authorised representative of Charter Financial Planning. This article offers general advice only. You should seek advice tailored to your particular circumstances before taking action.