Farmers have been told to urgently assess their cash flow position so they can be proactive in case of shortfalls caused by Covid-19, rural financial experts say.
The virus outbreak has caused a lot of uncertainty across the industry, with people worrying about input supplies and the ramifications on their own businesses.
However, a simple cash flow assessment could alleviate worries, according to Old Mill accountants and financial planners.
“Farmers are busy outside right now, but though the industry may be more insulated from the issues caused by Covid-19 than other sectors, it’s by no means immune," Andrew Vickery, head of rural services said.
"Farmers still need to be thinking about cash flow as it’s the main challenge for most businesses.”
Those in a tight financial position against their overdraft limit – or without an overdraft facility at all – have been urged to consider how the current climate will affect their cash position.
Farmers should assess whether the situation is likely to delay people paying them, or if it will disrupt the supply of goods, leading to short-term cash issues.
Putting a cash flow budget in place is also essential, Old Mill advised, even if it’s only basic as the margin for error is tighter than normal.
Mr Vickery said: “It might also confirm that the business is actually in a strong position and you don’t need to worry. It’s a useful tool for alleviating fears and identifying problems early on.”
Online bookkeeping software - which most farm businesses will have been using since April 2019 - also provides an easy way to look at the accounts.
It gives farmers a lot of information at their fingertips, allowing for easy cash flow planning. And a lot of the leg work will have already been done through VAT returns.
If an assessment highlights cash flow issues, speak to the bank as early as possible, Mr Vickery said: “Identify all of the information the bank is likely to need and what type of credit works best for the business.
"While the Coronavirus Business Interruption Loan Scheme has received a lot of publicity, it might not be the right solution for all borrowers, so understand which route the bank is likely to go down.”
Any lender will want financial information on the business, so farmers have been told to ensure accounts are up-to-date, year-end is completed and any explanation why the new or extra facility is needed to manage cash flow.
“Banks are going to be less willing to accept estimates because of the volume of requests they are having to process – so the bar is higher than normal,” warned Mr Vickery.
“In short, potential borrowers need to make it as easy as possible for the bank to process and approve their application.”
Farmers should take other precautions to avoid running out of cash; if buying new kit don’t use an overdraft – instead consider hire purchase, he advises. “It’s also worth considering capital repayment holidays on existing loans.”
Businesses which are directly affected by Covid-19 may want to furlough staff, but the scheme only lasts until the end of May, explained Mr Vickery.
Directors of limited companies can also furlough themselves if necessary, while the self-employment income support scheme could help those who trade as sole traders or partnerships.
