Top tips to deal with the banks
Dealing with the bank can be challenging at the best of times for farmers, but this relationship is key to keeping your business on track. How can you make it easier for yourself? Here's five top tips.
- Meet at least once a year -- this will be an annual review to re-assure your manager everything is going according to plan. If it isn't, he or she will want to know why and how you plan to adapt. The banks have specialist agri-advisers, who can provide valuable input for no extra charge.
- Prepare adequately -- know what money you may need for purchases or investments. This means you need to do a cash flow. It need not be rocket science and you do not need to have an accountant involved. Most banks have an easy-to-prepare document that will assist.
This way, you'll avoid costly breaches of agreed overdraft limits and long-term damage to your track record. Bankers don't like surprises and if you develop a reputation for being unpredictable, you'll find it harder to work deals to your advantage. You should also update the bank on your medium or long-term plans.
- Have the paperwork -- the manager will want to see the numbers to access how you can cope with existing or future debt. You'll need up-to-date farm accounts, along with stock numbers and values. Also have details of debtors and creditors, existing loans and repayments.
Details of leasing payments and taxes due will also prove helpful. If you get into the habit of doing this every year, the manager will be able to monitor progress from year to year. The records will also serve as an early warning indicator of possible loss-making occurrences and allow corrective action to be taken.
- Have your own questions ready -- don't be afraid to ask how you can save money on the services that the bank is offering. Make sure you know what interest rates and charges you are being charged and what you can do to save on those.
Also, be clear on the amount and frequency of repayments, security held or required and the terms and conditions applying to agreed facilities.
- Get online -- this gives you more control over your day-to-day banking, and saves you time and money with less visits to your bank. The less your banker needs to see you, the better, no matter how good your relationship is.
David McHugh is a financial consultant. Email: firstname.lastname@example.org