Hiring a farm business advisor pays off
Farmers can use business advisors as a resource to help them improve their operational decisions, forecast their incomes more accurately and reduce their costs.
Getting the right advisor for you is a significant decision, so it’s good to do your homework by asking a neighbour for a name or getting a referral from you financial institution. Farm Management Canada (FMC) and the Canadian Association of Farm Advisors (CAFA) have listings of many qualified advisors who can help you figure out the best way forward for your business.
The most important thing is to ask lots of questions before signing on with any advisor.
For this week’s post we chatted with Brad Buchanan, senior principal at Ward & Uptigrove in Listowel, who has more than 20 years’ experience in the field, having helped hundreds of farm business owners. Brad outlines seven ways advisors like him can make a difference for producers’ bottom lines:
Capital assets: Sometimes it’s tough to decide whether you should invest in a combine or hire the work out to a custom harvester. Advisors can work out the best option based on the size of your operation, your financial situation and what makes the most business sense for you.
Lease versus buy: Banks and dealers can have attractive interest rates for equipment leasing, but depending on your needs, buying could be the better way to go. Business advisors can provide a thorough analysis, including whether it’s better to lease and write off the monthly payment as an expense on your tax return, or to buy and depreciate the asset over time.
Employee planning: Advisors can help determine whether employees are needed, and how much they will cost – above and beyond wages. They know the rules around employee tax deductions, workers’ compensation, benefits and holidays. For example, it’s important to register with the Workplace Safety and Insurance Board even if you have workers for only a few weeks, in case of on-farm injuries.
Some advisors will even develop job descriptions for larger employers to ensure everyone knows what is expected of employees, and avoid conflict if there are problems in the future
Lowering taxes: Paying wages to children and spouses who work on the farm can be a good way to split incomes and reduce your taxes. The way your business is structured – whether a sole proprietorship, partnership or corporation – also has an effect on the amount of taxes you pay. Advisors can help you determine the optimal structure for your operation.
Benchmarking: Advisors can compare your operation to others of a similar size highlighting areas where you are doing well and not doing well and how you might improve. For example, in dairy, if your feed costs are higher and your milk production is also higher, you may not have a problem. If, however, your feed costs are high and your production is lower than average, it may be time to talk to your feed supplier.
Cost of production planning: Deciding whether it’s worth it to plant corn this year based on how much it’s going to cost to put it in the ground can be tricky. A business advisor can take into account all your input costs – including seed, fertilizer, energy, and labour – measure the total against forecasted prices and provide you with sound direction.
Forecasting/financing; When you’re planning a major purchase like building a barn or buying a piece of land, your creditors want to know that you can make the payments. A business advisor can work out the numbers to help you demonstrate you have enough cash flow to finance the project.
Consider your farm business advisor as a member of your management team who brings the experience and knowledge from working with many farmers to your operation.
Brad Buchanan, CGA, is a member of the Canadian Association of Farm Advisors (CAFA), a non-profit professional association dedicated to assisting farm businesses by increasing the skills and knowledge of farm business advisors. Visit www.cafanet.ca for details.