The Farming the Business manual P2PAgri produced for the Grains Research and Development Corporation (GRDC) has become a widely used resource at all levels in Australian agriculture – from farmers, to advisers and in education.

This fact sheet explains why a balance sheet is an essential farm finance management tool. It explains terms like net worth, equity and the different types of assets and liabilities.

A proven way for growers to increase profitability and decrease the cost of production is to farm more land. Leasing and share farming offer alternatives to buying land.

The earlier we start succession planning, the more options we will have in responding to the needs of family members and their changing involvement in the farm business.

A detailed tutorial on how to use Rice$cenario. This video covers the Part 1 and 2 of Rice$cenario - Water costs and gross margins.

Remember that each business is different and each business owner is different in terms of priorities, circumstances and attitude to risk - plans made for one business may not suit others. Graham Christie, Rural Financial Counsellor suggests several areas and processes to explore when you are developing your plan.

Without access to finance, growing your business and even accessing adequate working capital can be very difficult. Reducing your finance costs by trying to pay as little as possible in interest and fees to your financier is good business practice.

The benchmarking process is commonly used for comparative analysis to improve business performance. No two businesses – or business people - are the same, so care is needed when comparing your business to others, as you may not be comparing ‘apples with apples’.

Every business has limited productive resources, including land, labour, management and capital. Getting the most profitable results from your farm business requires a careful balance of input costs to produce the optimum yield.

Good cost management is central to running a profitable farming business. It is not just about reducing costs but understanding the returns. 

Many Australian farmers are involved in ‘multiple enterprise’ farming systems, which means the profits from each enterprise should be known. It is important to understand gross margin budgets and their role in farm financial analysis.

Maintaining a sound business management discipline of measuring business performance, using this information for planning and then learning from each year’s results, will ensure a healthy and sustainable business.

One of the few legal obligations on a farm business is to have an annual tax return completed, so by default, tax returns remain the number one financial record of a farm business. However, as few farmers know how to read and use them, they are one of the most under-utilised resources in a farming business.

As farm businesses become more sophisticated and owners strive ever harder to improve profitability and create wealth, the move beyond simple measures of physical production to whole business analysis is gaining momentum. The use of financial ratio and benchmark analysis has become increasingly popular with progressive farm business operators in recent years.

Maintaining strong control of the cash flow means planning (estimating) and monitoring the cash flow. Many farmers and banks would say cash flow is KING and that is why a cash flow budget is so important!