Transcript Dairy Business Management – Week 3
1
Recap on last week Cash and Profit Benchmarking Assessment 2
◦ ◦ 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?
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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
Layout of a Cash Flow Budget
Jan Feb Mar Apr May Jun CASH IN
Cash sales Loans
Total receipts Variable Costs
Materials Wages
Total variable costs Other Costs
Drawings Hire of tractor Repairs Utilities Loan Repayments Bank interest Accountant & Ins
Total fixed costs Capital expenditure
Buildings Equipment
Total cap expend
200 20,000
20,200
1,193
1,193
600 263.5
160.6
1,024
15,000 5,000
20,000
350
350
555
555
600 100 50 263.5
160.6
1,174 0
871
871
1,535
1,535
600 50 300 263.5
160.6
300
1,674 0
6,391
6,391
767
767
600 100 50 263.5
160.6
300
1,474 0
5,800
5,800 0
600 50 263.5
160.6
1,074 0
2,786
16,398 20,000 2,786 36,398 0
1,000 50 150 263.5
160.6
1,624 0 Total 4,050 0 4,050 4,000 200 100 600 1,581 964 600 8,045 15,000 5,000 20,000 Net Cash flow -2,017 -1,379 -2,338 4,150 4,726 1,162 4,303 Cumulative CF -2,017 -3,396 -5,734 -1,584 3,142 4,303
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-50 -60 -70 -80 0 -10 Jan Feb Mar Apr May Jun Overdraft not being repaid Jul Aug Sep Oct Nov Dec -20 -30 -40 7
80000 60000 40000 20000 0 Jan -20000 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 -20000 -40000 -40000 -60000 -80000 -60000 -80000 80000 60000 40000 20000 8
80000 60000 80000 60000 40000 20000 40000 20000 0 Jan -20000 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 -20000 -40000 -40000 -60000 -80000 -60000 -80000 9
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
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
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
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
CASH Sales Variable costs Business overheads Telephone bill Machinery purchased (no loan) Drawings & tax paid CASH SURPLUS/ DEFICIT (after drawings & tax) PROFIT £ +150,000 Sales -75,000 Variable costs -30,000 Business overheads -3,000 -50,000 Telephone bill (2/3rds to farm) Depreciation (buildings & machinery) -20,000 -£28,000 PROFIT £ +150,000 -75,000 -30,000 -2,000 -15,000 £28,000 14
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
“Helps farmers to assess their own business performance and compare their physical and financial results with other similar farms”
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Collect data Analyse data Compare your results Identify reasons for variation *Formulate action plan* *Implement plan* 17
◦ 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
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
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 21
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 Total cost of production/litre Margin over concentrate (MOC) 22
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
Dairy cows report 2013/2014
Accounts Output
Milk Output Calves Less Replacements
Total Output Variable Costs
Forage Costs Concentrates Vet/Medicine Breeding Costs Sundry Costs
Total Variable Costs Gross Margin Overhead Costs
Machinery depreciation Machinery running costs Fuel costs Contractor charges Building depreciation Property repairs Electricity Water & Rates Business admin costs Miscellaneous Costs
Total common overhead costs Total common costs Net Margin
Paid Labour Conacre Finance
Total Overhead Costs* Total Costs* Net Profit* *excl. Family labour 2 years ago £/Cow
1,890 140 -225
1,805
110 515 60 6 25
716 1,089
250 35 65 20 40 40 25 18 25 10
528 1,244 561
45 15 27
615 1,331 474 1 year ago £/Cow
1,600 100 -350
1,350
160 600 20 5 50
835 515
225 36 80 25 40 40 20 15 12 0
493 1,328 22
60 10 0
563 1,398 -48
170 685 60 3 50
967 822
220 55 70 25 100 10 25 15 30 5
555 1,523 267
0 6 0
561 1,528 261 £/Cow
2,040 130 -380
1,790 This year 2013/2014 £/Ha
3,672 233 -684
3,221
0 306 1,233 108 5 89
1,741 1,480
0 396 99 126 44 180 19 45 27 54 9
1,000 2,741 480
0 10 0
1,010 2,751 470 PPL
31.38
1.99
-5.85
27.53
0.00
2.62
10.54
0.92
0.04
0.76
14.88
12.65
0.00
3.38
0.85
1.08
0.38
1.54
0.16
0.38
0.23
0.46
0.08
8.54
23.43
4.10
0.00
0.09
0.00
8.63
23.51
4.02
Average all £/Cow
2,300 142 -212
2,229
151 683 41 29 84
988 1,241
85 52 44 76 93 32 31 11 25 10
459 1,447 782
33 48 16
556 1,544 685
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Simplified Financial Report
Dairy cows report 2013/2014
This year 2013/2014 £/Cow Average all Accounts Output
Milk Output Calves Less Replacements
Total Output Variable Costs
Forage Costs Concentrates Vet/Medicine Breeding Costs Sundry Costs
Total Variable Costs Gross Margin Overhead Costs
Machinery and building depreciation Machinery running costs, contractor Property repairs Electricity, Water Rates Business admin costs Paid Labour Conacre Finance Miscellaneous Costs
Total Overhead Costs Net Margin
2,040 130 -380
1,790
170 685 60 3 50
967 822
320 150 10 40 30 0 6 0 5
561 261 £/Cow
2,300 142 -212
2,229
151 683 41 29 84
988 1,241
178 172 32 42 25 33 48 16 10
556 685
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Gross Margin
Dairy cows report 2013/2014
Accounts Output
Milk Output Calves Less Replacements
Total Output Variable Costs
Forage Costs Concentrates Vet/Medicine Breeding Costs Sundry Costs
Total Variable Costs Gross Margin This year 2013/2014 £/Cow
2,040 130 -380
1,790
170 685 60 3 50
967 822 Average all £/Cow
2,300 142 -212
2,229
151 683 41 29 84
988 1,241
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Net Margin
Overhead Costs
Machinery and building depreciation Machinery running costs, contractor Property repairs Electricity, Water Rates Business admin costs Paid Labour Conacre Finance Miscellaneous Costs
Total Overhead Costs Net Margin
No family labour included 320 150 10 40 30 0 6 0 5
561 261
178 172 32 42 25 33 48 16 10
556 685
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Simplified Physical Report
Dairy Cows Physical performance
STOCK and LAND
Cow Number Stocking Rate (CE/ha) Total Farm Size Land Used for Dairy Cows Replacement Rate (%) Culling Rate %
MILK
Milk price (ppl sold * transport cost deducted) Annual Production/Cow (Litres) Milk From Forage/Cow (Litres) Milk From Forage/Hectare (Litres) Milk Per Labour Unit (Litres) ButterFat % Protein % Average SCC ('000/ml) Average Bactoscan ('000/ml)
CONCENTRATE FEED
Meal Fed Per Cow (Kg) Meal Fed Per Litre (Kg) Margin over Concentrate (£/cow) Margin over Concentrate (ppl)
This year 2013/2014
120 1.82
103.00
67.13
43 28 31.30
6,518 662 1,203 1,200,194 4.16
3.15
206 54 2,635 0.40
1,348 21.00
Average all 2013/2014
119 2.16
87.28
55.47
30 25 33.10
7,334 1,616 3,386 692,183 4.04
3.24
246 33 2,573 0.34
1,724 23.61
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Discuss the benchmark report Compare to average figures What are the positives?
What are the negatives?
What could be improved?
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• 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 30
◦ ◦ A process to help farmers assess their own business performance Physical performance Financial performance Benchmarking will identify areas for improvement No action, No benefit 31