5 hard but simple questions that every dairy farmer needs to ask
In less than a month we shall be in the thick of calving so now is the time to get set up for the year ahead.
All indications suggest that based on the back of a good milk price many farmers are also availing on the opportunity to increase in herd size.
Recently I was again exposed to 'Lean Management' principles after listening to a talk by Leading Edge Group.
One management technique that I felt was very applicable to dairy farming was the '5 Whys' - these are used to get to the core route of a problem.
If you are struggling repeatedly with the same problem on the farm, maybe you need to ask yourself some hard but simple questions.
Many farmers fall into the trap of cashflow shortfalls especially when the milk price is poor and rely heavily on a good year to recover.
- In this scenario, the first of the five questions is 'why do I always run short of cash'. One potential answer is because 'I fail to budget'.
- The second question is 'why do I fail to budget?' and the answer may be 'because it's time consuming and things change through the year which make the budget irrelevant'.
- The third is 'why is the budget irrelevant?' and the answer could be 'because I fail to monitor my income and expenditure through the year and update the figures'.
- This leads on to a fourth question: 'why do you fail to monitor income and expenditure'? Perhaps 'because it is difficult and time consuming when I'm busy on the farm'.
- And finally you may ask yourself 'why is it difficult and time consuming?' Is it because you I haven't found an easy way to get to the information you require?
The obvious solution is to find a management tool which simplifies the whole process.
Market sentiments suggest milk prices might start to fall in 2018.
However in my experience where milk price starts high and falls you are generally financially better off than when it starts low and rises. But I would stress that I am not using this statement as a reason for complacency.
It's more of a word of warning to start squirrelling away some cash for a tougher year in 2019.
I have been budgeting, and monitoring income and expenditure and to improve this I decided to trial the Cashminder farm management software from Agrinet.
Cashminder monitors income and expenditure based off bank files so as long as you can use on-line banking you can use the system. It also has the capacity to import co-op trading accounts.
Once uploaded it's simply a case of allocating the transaction to an income or expense code and business name. This is very easy and very quick.
Previously I have used PC accounts systems which relied heavily on me keying in data and transactions.
It was very time-consuming and limited my ability to get to it on a monthly basis. It was also eating into my time for the work I love on farm and at group. I knew things had to change, so I too asked myself the '5 Whys'.
Having reduced the time spent on this year's accounts from a few weeks to days, I now have a renewed sense of being able to get to grips with the farm finances on a monthly basis.
It really is quite easy so why not have a go to set your self up to manage the potential volatility in milk price to come.
Mary Kinston is a discussion group facilitator and consultant, and farms with her husband in Co Kerry
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