{"id":10518,"date":"2023-02-02T17:30:00","date_gmt":"2023-02-02T17:30:00","guid":{"rendered":"https:\/\/www-dev.promar-international.com\/?p=10518"},"modified":"2023-02-02T17:30:00","modified_gmt":"2023-02-02T17:30:00","slug":"dont-let-high-farm-profits-catch-you-out","status":"publish","type":"post","link":"https:\/\/www-dev.promar-international.com\/it\/dont-let-high-farm-profits-catch-you-out\/","title":{"rendered":"Don\u2019t let high farm profits catch you out"},"content":{"rendered":"\n

The present financial year has seen commodity prices higher than anyone can recall. This is showing now with positive cashflow on farm, which means that farm profits for the year are likely to be above average.<\/strong><\/p>\n\n\n\n

The positives of unprecedented profits<\/strong><\/h2>\n\n\n\n

Many dairy farmers will record unexpectedly healthy profits for this financial year. This is due mostly to average milk prices<\/a>, which are up almost 20p\/litre over 12 months. For many, these rises have more than offset the increased costs of production.\u00a0<\/p>\n\n\n\n

A potential consequence of these profits is that it could lead to a greater tax liability, which could cause cashflow pressure in the next financial year, when milk prices are predicted to fall more quickly than commodity costs.<\/p>\n\n\n\n

Buy a new tractor?<\/strong><\/h2>\n\n\n\n

The default option for many farms, when they have surplus cash in the bank, is to look to reinvest in the company. This may not always be the most efficient option, especially if you don\u2019t plan for the possible finance costs. Investing in equipment if it improves business operation and efficiency is not necessarily unwise, but you may have better options.<\/p>\n\n\n\n

To avoid making decisions you may regret, it\u2019s important to plot your plan of action as soon as possible.<\/p>\n\n\n\n

Make a quick start<\/strong><\/h2>\n\n\n\n

An obvious starting point is to estimate your potential annual profit well before the end of the tax year. Assuming your tax period ends in April, then your profit\/loss information up to December 2022 will be imminent. This data will allow you to budget for the rest of the final quarter. In this task, the use of comprehensive management accounting systems such as Agstute<\/a> can be invaluable.<\/p>\n\n\n\n

Create a strategy<\/strong><\/h2>\n\n\n\n

With time on your side, you can move forward in a planned and measured way. Now, you could either spend valuable hours researching possible strategies yourself, or you could save time by speaking to experts. These would include:<\/p>\n\n\n\n