Guidelines for Minimum Standards Property Management Planning. Financial Management Module

Guidelines for Minimum Standards Property Management Planning Financial Management Module June 2011 June 2011

Acknowledgements All stakeholders who contributed to the development of the Financial Management Module are gratefully acknowledged. Particular thanks are extended to the Rural Financial Counselling Service Tasmania for allowing the use of certain parts of the Enterprise Action Plan within the module and to Industry and Investment NSW (previously NSW Agriculture) for allowing the use of and reference to the Farm Pack Tool within the module. Thanks is also extended to the following agencies for their contribution and input into the module during the development process: Australian Government, Department of Agriculture Fisheries and Forestry Tasmanian Government, Department of Economic Development, Tourism and the Arts Tasmanian Government, Department of Primary Industries, Parks, Water and Environment Tasmanian Farmers and Graziers Association Rural Financial Counselling Service Tasmania Inc June 2011 2

Contents Introductory Information p.4 Why Complete the Financial Management Module? p.4 Objectives of Completing the Financial Management Module p.4 About the Financial Management Module p.5 Ownership and Confidentiality p.6 Qualification Requirements p.6 Summary of the Module Completion Process p.6 Completing the Financial Management Module p.7 Part A: Situation Analysis of the Farm Business Finances Part B: Cash Flow Projections p.8-13 p.14-17 Part C: Risk and Strength Assessment p.18 Part D: Setting Targets and Actions p.19-21 Part E: What Comes Next p.22 Appendices p.23-26 References p.27 June 2011 3

Introductory Information Why complete the Financial Management Module? Understanding how your farm business finances are performing is integral to being able to make smart decisions relating to the activities that you carry out in your farming operation. While the profit and loss statements and balance sheets included in your tax return provide important figures for the operation of your farm business, the financial data that they provide can be broken down even further to provide more meaningful information which can be used to assess the performance of your farm business finances over time. The financial management module is a basic tool which helps you, as the farm operator or business manager, to do this and aims to help you to make more informed decisions relating to the management of the entire farming operation. Objectives of Completing the Financial Management Module Upon completion of the Financial Management Module the business manager/farm operator should have: A) Developed an improved understanding of the performance of the farm business finances recognising the need to access cash and funding for your ongoing farm needs; B) Enhanced their ability to review and interpret financial data and information and make projections which are relevant to the farming operation; C) Implemented a process for documenting and updating financial information relating to the farm business; and D) Improved their ability to link other elements of the farms management with its financial management. By achieving each of these objectives the business manager/farm operator should be able to make more informed business decisions and have an improved ability to monitor the financial performance of the farm business. This is important in ensuring that the farm business is managed viably and that meaningful decisions can be made about the activities which are undertaken in the farming operation. Understanding the unique goals and finances for your farm business will allow you to develop a risk management plan that will better allow you to adapt to events as they occur. Other modules included in the Property Management Systems framework can offer practical and realistic information and tools to develop your action plans. Refer to www.tfga.com.au or www.farmpoint.tas.gov.au for further information. June 2011 4

About the Financial Management Module The Financial Management Module has been designed specifically for farmers and farming families who do not have in place a system for analysing the financial performance of their farm business. Whilst the Financial Management Module is designed to be an effective and useful tool it is not intended to be used in isolation nor replace the need for seeking professional advice when appropriate. The module outlines the steps that the business manager/farm operator should take to analyse the performance of the farm finances and includes user friendly tools, resources and a list of contacts and reference points that will assist in completing this analysis and in developing strategies to manage the farm finances. This module has been developed by the Tasmanian Farmers and Graziers Association as a core component of a base level property management plan under the Tasmanian Property Management Planning Framework (see figure 1). The module is likely to provide more meaningful outcomes if completed in conjunction with other property management planning modules. By working through each module, you will be better able to gain a clear picture of the risks and opportunities within your farming business and prepare for the challenges and successes that lie ahead. Figure 1: Structural Outlay of a Base Level Property Management Plan Base Level Property Management Plan Base Line Resource Assessment Property Description Property Maps Natural Resource Inventory Land Use and Management Goals and Objectives Business and Finance Natural Assets Human Resources Financial Management Soil Succession Planning Strategic Business Planning Water Occupational Health and Safety Recognition of Existing Systems Biodiversity Recognition of Existing Systems Recognition of Existing Systems Action Planning June 2011 5

Ownership and Confidentiality The content of the completed Financial Management Module is owned solely by the individual property owner/s and should be treated as confidential in all circumstances. In the event that the module is submitted to a third party for any purpose, the property owner will maintain sole ownership of its content unless a contract is knowingly entered into stating otherwise. Qualification Requirements When completing the financial management module as a farm business management tool there is no set qualification or experience requirement as the module has been designed specifically for completion by farmers. However, if assistance is required when completing the module it may be useful to engage someone with an agricultural or rural background and experience in financial management, financial counselling, accounting or similar. Summary of the Module Completion Process The Financial Management Module is separated into five sections and can be completed in a staged approach or all at once. Each section of the module is outlined below: Part A: Situation Analysis of the Farm Business Finances A financial situation analysis of the farm business finances is conducted in order to generate a number of financial ratios and percentages which provide an indication of how the farm business finances have been performing over time. Part B: Cash Flow Projections Cash Flow Projections for the farm business are developed based on the financial data generated in Part A. These projections can help to refine production strategies and assist in strategic business planning. Part C: Risk and Strength Assessment This section guides farmers through a short series of questions which aid in determining what risks and strengths may be associated with the farm business finances. Part D: Setting Targets and Actions In this section economic targets and actions relating to the farm business finances are developed for the farm business based on the information derived from completion of parts A, B and C of the module. Part E: What Comes Next Brief explanations of economic indicators and trends are provided to assist farmers and farming families in understanding financial information and determining what their financial data means. June 2011 6

Completing the Financial Management Module Completing the Financial Management Module The following sections will guide you through the process of completing the Financial Management Module. You can chose to complete all or part of the module depending on what part of the farm finances you wish to focus on. It is however important to remember that by completing the entire module you will get a more comprehensive understanding of how your finances are performing and what this means for the farm business. The focus of the module is on guiding you through a process of analysing and managing your own farm business finances and therefore it has been designed to allow flexibility in which tools or financial management packages can be used to complete each section within it. This will mean that individual farming operations can select tools which are best suited to their needs. For those who do not have a preference for any particular tools, suggestions have been provided in some sections of the module as to tools that can be used. If you do choose to use tools other than those suggested when completing the module it will be worth checking that they have similar financial data outputs to those recommended in each section so that the module can be easily completed. Electronic version V s paper based version: The module has been designed to be completed in an excel based format, however some parts of it can be completed manually using by printing out the excel worksheet if you wish to do so. Farm Pack shown in Appendix 1 is an example of a toolkit that can be completed either electronically or using a paper based version. Supporting electronic files can be downloaded from the TFGA website www.tfga.com.au June 2011 7

Part A: Situation Analysis of the Farm Business Finances How are the farm finances looking? Purpose: Analysing the financial performance of the farm business is an important tool in identifying if the farm finances are performing satisfactorily. This section of the module will help you to do this and should help you to compare your farm business with industry benchmarks. Part A - Task 1: Selecting a Tool to Analyse the Farm Business Finances Task: Select a suitable farm financial analysis tool or use the Farm Pack tool provided in Appendix 1 or the electronic version on the TFGA website at www.tfga.com.au and analyse the performance of your farm finances. Task Details: The tool that you select should help you to calculate a range of financial data relating to the performance of the farm business finances which can be easily understood by you as the farmer or as a member of the farming family. Some important measures of the performance of your farm finances are as follows: 1. Ratio of liabilities to income 2. Total farm business costs as a percentage of total farm business income 3. Finance costs as a percentage of total farm business income (Interest cover) 4. Equity (Net Worth) 5. Return on capital 6. Return on equity It is important that you understand what your financial data means so that you can develop a clear understanding of how your farm business finances are performing and what you can do to manage them so that they perform well. Table 1 and Table 2 below provide some brief information that may help you to better understand what different financial indicators mean and how they can be applied to your farm business. Other useful tools that can be used to analyse the farm finances are listed in Appendix 5. June 2011 8

Table 1: Important Financial Performance Indicators for completing the Financial Management Module Financial Indicator Explanation Ratio of Liabilities to Income = Total Liabilities Total Farm Cash Income A measure of the amount of farm business debt that you have comparative to your total farm business income. In a mixed farming business a ratio of greater than 1.5 generally indicates that debt levels may be unsustainable. However this figure will vary between different enterprises. It may be necessary to seek professional financial advice and assistance if your debt levels are unsustainable. Total Farm Business Costs as a Percentage of Total farm Business Income = Total Farm Business Costs x 100 Total Farm Business Income 1 This figure provides an indication of how much of your income is consumed by business operating costs. Where this figure exceeds 65% in a mixed farming business then adjustments may need to be made to reduce operating costs or increase income. Finance Costs as a Percentage of Total Farm Business Income = Total Finance Costs x100 Total Farm Business Income 1 This provides an indication of how much of your farm business income is allocated to servicing debt. Where this figure is 25 % or greater then this indicates that financing costs are too high and that the farm business may be significantly impacted upon by changes in interest rates. Equity = Net Worth x100 Total Assets 1 This is a good figure to monitor over time as it indicates what your net worth is as a percentage of your total assets. You should be aiming to increase your equity over-time and by monitoring it annually you can measure changes in debt levels and asset values. Return to Capital = Operating Profit x100 Total Assets 1 Return to Equity = Business Return x 100 Net Worth 1 This figure provides you with an indication of the percentage of financial return that is being delivered from your total assets. Your total assets include both those assets which are financed and those which are not financed. This is a good measure of efficiency and can be used for benchmarking your farm business. Return to capital should however be used carefully as an efficiency measure as in some circumstances it can reduce but not necessarily mean that your farm business is operating less efficiently. For example if the value of your land increases and your return (operating profit) remains the same then your return to capital will be reduced because your operating profit will now represent a smaller percentage of your total asset value. This measure provides an idea of how much your farm business returns as a percentage of the capital that you actually own and which is not financed. This is again a measure of efficiency. June 2011 9

Table 2: Additional Financial Performance Indicators Financial Indicator Gross Margin % = Gross Profit x 100 Sales 1 Gross Margin / hectare Explanation This is a measure of returns made to the farm business from the sale of goods (gross income) after you have taken out the direct cost of producing those goods. If your gross margin is equal to 26% then this means that for every $1.00 of income that you receive from sales, 0.26 cents is returned to the farm business. Importantly it should be noted that gross margins do not take into account all overhead costs to the farm business such as interest payments on finance and so a gross margin of 26% does not mean that the farm business makes 26% pure profit from those sales. A Livestock and a Crop Gross Margin tool has been developed by the Tasmanian Department of Primary Industries, Parks, Water and Environment and can be accessed from www.farmpoint.tas.gov.au to assist you in determining Gross Margins. See Appendix 4. This is a measure of returns made to the farm business from the sale of goods (gross income) after you have taken out the direct cost of producing those goods divided by the area under production. The higher the Gross Margin / hectare the more likely that it is to generate higher financial returns to business. This analysis can be applied to livestock, cropping and vegetable enterprises. = Gross Profit ($ ) Productive Area (ha) Gross Margin / DSE = Gross Profit ($ ) Enterprise DSE* *(DSE) Dry sheep equivalent Cost of Production Calculations will vary for individual enterprises. Importantly it should be noted that Gross Margin / Hectare does not take into account all overhead costs to the farm business such as interest payments on finance and other unallocated overhead costs. Refer to Appendix 4 for the Gross Margin Toolkits prepared by the DPIPWE This is a measure of returns made to the farm business from the sale of goods (gross income) after you have taken out the direct cost of producing those goods divided by the area under production. The higher the Gross Margin / DSE the more likely that it is to generate higher financial returns to business. This analysis is only applied to livestock enterprises. Importantly it should be noted that Gross Margin / DSE does not take into account all overhead costs to the farm business such as interest payments on finance and other unallocated overhead costs. Refer to Appendix 4 for the Gross Margin Toolkits prepared by the DPIPWE This figure indicates how much it will cost your farm business to produce a certain quantity of goods. By knowing what your cost of production is you can make more informed decisions about what you will produce, how much you will produce and how you will produce it etc. The Livestock and Crop Gross Margin tool will help calculate Cost of Production. Refer to www.farmpoint.tas.gov.au You may also find cost of production calculators for crops, livestock and other enterprises on the internet or may wish to seek professional assistance for calculating your cost of production. For example Meat and Livestock Australia (MLA) website provides useful calculators for the cost of production of beef and sheep. See www.mla.com.au June 2011 10

Table 2: Additional Financial Performance Indicators continued Financial Indicator Explanation Operating Profit per Hectare = Operating Profit ($) Productive Area (ha) This is a measure of how profitable each hectare of land that you have under production is. You can monitor trends in this over time to develop a better understanding of how profitably your farm business is operating. Part A - Task 2: Recording and Plotting the Farm Financial Data Task: 1. Fill in the table below with the data that you have generated from completing your financial analysis. Refer to worksheets shown in Appendix 1. 2. Rate the performance of the farm business finances on the scales provided on page 12. Task Details: By recording your financial data in the table below you can begin to build an accurate record of the performance of your farm business finances. You should re-complete Task1 for up to three of the most recent years which you have financial records and then add the data for each of these year into the table below. This will begin to show you trends in the financial performance of your farm business in past years. In each future year you should continue to re-complete Part A of this module so that you can compare your farm business s financial performance against previous years. Eventually you will build a long term picture of the performance of your farm business finances and will be able to identify strengths and weaknesses that you need to work on. You may also wish to plot your financial data on a graph so that you can easily see trends in the performance of the farm business finances over time. June 2011 11

Current and Historic Financial Performance Data: Financial Indicator Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Liabilities to Income Ratio....... Total Costs as % of Income % % % % % % % Finance Costs as % of Income % % % % % % % Equity % % % % % % % Return on Capital % % % % % % % Return on Equity % % % % % % % Rating the Farm Finances It is important to be able to interpret your financial data so that it provides meaningful information about how your farm business finances are performing. Mark your own financial data on the black line in each of the relevant scales below. Ratio of Liabilities to Income Poor Marginal 2.5 Satisfactory 1.5 Strong 0.5 Business Costs to Business Income Poor Marginal 75% Satisfactory 65% Strong 55% Finance Costs to Business Income Poor Marginal 25% Satisfactory 15% Strong 7% Equity Poor Marginal 40% Satisfactory 65% Strong 85% Return on Capital Poor Marginal -5% Satisfactory 0% Strong +5% Return on Equity Poor Marginal -5% Satisfactory 0% Strong 5% Note: these benchmarks are indicative only and may not be applicable to all farm businesses. Refer to Table 1 on P9 for further information on interpreting these financial indicators. June 2011 12

Checklist for Completing Part A Task I have selected a tool for analysing the farm business finances and have completed an analysis I have reviewed and now understand each of the financial indicators relevant to my farm business Completed Yes No I have recorded financial data for the farm business I have marked my financial data on the scales provided and assessed the performance of my farm business June 2011 13

Part B: Cash Flow Projections Planning Ahead! Purpose: Completing cash flow projections is an essential element of managing a farm business operation. These projections are important in determining what the likely growth in the farm business is to be over a period of time and can help to allocate expenditure appropriately. They can also help you to better manage sudden and short-term changes in expected income and/or operating costs as well as helping you to determine whether a particular crop, production schedule or farming activity will be financially viable and whether there is a need to access external finance. Because of the variable nature of farming it can often be difficult to make cash flow projections for a farm business. This is mainly due to the significant influence that variables such as weather, commodity prices, environmental factors etc. can have on productivity and profitability. Regardless of this variability it remains highly important that cash flow projections are made so that the viability of planned production schedules and farming activities can be determined. Cash flow projections for the farm business will provide guidance on what amount of income needs to be achieved in order to maintain profitability and will also provide a basis on which expenditure can be adjusted if income unexpectedly changes. Importance of Short and Long Term Cash Flow Projections Short-term projections (monthly or quarterly): These are important because they help you to better plan for sudden variations in income and expenditure that result from changes in commodity prices, production fluctuations, input costs and other operating costs. Further, by preparing monthly cashflows allows a business to determine at what times of the year a cash deficit (shortage) may exist compared to being in cash surplus. By understanding the timing and quantum of cash shortages allows a farm business to organise an appropriate bank overdraft facility (if required) with their lender. Long-term cash flow projections (annual or seasonal): These can help you to better plan for longerterm finance and capital needs; improve production planning and can help you to identify what the likely growth in the farm business will be over the coming years. June 2011

Financial information a bank may require? Lender information requirements For any farm business operation that is seeking funding from a bank or other financial institution being prepared and knowing what information a bank requires can aid the lending process. A monthly cashflow is a key component to this and will help plan and identify an appropriate bank overdraft limit to determine seasonal funding requirements. It is important to remember to prepare cashflow statements based on when money is to be received or paid, not when crops are harvested or when chemicals may be applied. The following table provides a high level description of some of the factors that a bank review in making an assessment in order to provide funds to a farming business: Information Entity Structure Balance Sheet Historical financial information Financial Projections Ratio s Description Agribusiness lenders will need to understand the structure (ie partnership, company, trust) of the farming operation and determine which entity or individual owns the title over the land of operation. Lenders will further require a statement of financial position (balance sheet) to assess the asset (land, buildings, water assets, machinery and livestock) and liabilities (existing loans) of the operation. Your accountant would be able to provide this information for the latest available financial year An agribusiness lender may ask for historical information of up to 3 years to understand how the business has performed. This may include historical production statistics. An agribusiness lender may ask for forecast financial information of up to 2 years to understand the expected future cash flows of the business. Further a lender will want to understand the underlying assumptions around revenue (crop and livestock production statistics and rationale for assumptions) and compare with what has been achieved historically and assess whether management has the capacity to manage any increased production or the resource base to do so. Agribusiness lenders will use the information provided to make their own assessment of providing finance to a business. These may include the ratio s as shown on page 9 as well as the following: LVR: Loan to Value Ratio is basically the amount you are borrowing represented as a percentage of the value of the property being used as security for the loan. The lower the LVR the lower the risk to the bank. DSCR: Debt Service Coverage Ratio is calculated by dividing net operating expenses (income less expenses) by debt service expense (interest & debt repayments). Ideally this ratio should be greater than 1. Equity: As described on page 9. The optimum level of equity will differ depending on the business enterprises, however when a farmer has less than 50% equity signs of financial stress are usually observed. Something to think about! Many of Australia s major agri-business lenders require 2 to 3 years of financial projections from clients when they wish to access finance for their farm business. If you are unable to provide these projections lenders will often use industry averages to calculate financial projections on your behalf. This means that if your farm is performing above average and you do not provide your own financial projections then the finance the bank makes available may be less favourable then it could be. June 2011

Part B -Task 1: Selecting a Cash Flow Projection Tool Task: Select a cash flow projection tool and complete cash flow projections for your farm business. Refer to Appendix 2 for the cash flow projections spreadsheet or an excel file at www.tfga.com.au Task Details: A cash flow projection spreadsheet is provided in Appendix 2 as one useful tool which you can use to complete cash flow projections for your farm business. Appendix 5 also lists a few of the many other tools that are available for you to use. When selecting a cash flow projections tool it should at a minimum: A) Include capabilities to complete monthly or quarterly financial cash flow projections as well as annual projections B) Break down the businesses cash flow into the following aspects at a minimum: Total Income Gross farm income Total farm income (Gross farm income + other Income) Total Expenditure Total operating costs Finance, living and labour costs Capital costs and; Budget Surplus/Deficit C) Provide or incorporate a tool or spreadsheet that helps you to calculate financial assumptions which you can base your cash flow projections on. See example below. Crop and Livestock Gross Margin templates and Designing a Successful Business templates included in Appendix 4 or found on www.farmpoint.tas.gov.au are available to assist in calculating projections. Income Example: Assumptions for financial projections Crop Income Area (ha) Yield (T/ha) Price/tonne Total $ Livestock Income Type No. sold Price/head Total $ June 2011 16

Part B - Task 2: Recording Cash Flow Projection Data Task: Record the financial projections that you have made for your farm business in the table below. Task Details: Using the data that you obtain from completing Part B Task 1 fill in the following table. Completing this table annually will help you to monitor the accuracy of your cash flow projections and may help to improve your ability to make more accurate projections into the future. Cash flow Projections: Financial Information Year 1 Year 2 Year 3 Gross farm Income $ $ $ Total Income (Gross Farm + $ $ $ Other Income) Total Operating Costs $ $ $ Finance, Living + Labour Costs $ $ $ Capital Costs $ $ $ Total Expenditure $ $ $ Surplus/deficict $ $ $ Checklist for Completing Part B Task Completed Yes No I have selected a cash flow projection tool I have completed short term and long term cash flow projections for the farm business I have recorded my cash flow projection data June 2011 17

Part C: Risk and Strength Assessment Spotting the Gaps! Purpose: This section of the module is for self assessment purposes only and involves answering a short series of questions that aim to help you summarise and analyse the overall position of the farm business finances. It is intended that this section will help you to identify areas of risk associated with the farm business finances that you may need to address and will highlight strengths on which you may be able to build. Part C - Task 1: Completing the Risk and Strength Assessment Task: Complete the Financial Management Module Risk and Strength Assessment using the template provided in Appendix 3. Task Details: The instructions for completing the risk and strength assessment are as follows: 1. Choose one of the responses for each question by ticking the column that is most accurate for your farm business. 2. Each response column is coloured, red, orange, green or grey to indicate the risk level associated with your response as follows: Red - High Risk Orange - Medium Risk Green - Low Risk Grey - Review the issue and then re-answer the question 3. If the question is not relevant tick N/A and move on. 4. In the details box include any relevant information relating to your answer to the question 5. In the summary box at the end of each section, summarise the main risk and strengths and list any actions that need to be carried out. Checklist for Completing Part C Task I have completed a risk assessment relating to my farm business and have identified risks and strengths that need addressing Completed Yes No June 2011 18

Part D: Setting Targets and Actions Knowing Where You Are Going! Purpose: Setting financial targets for the farm business finances is an important tool in encouraging growth in the farming business. It is important that these targets are documented as this provides the opportunity for all involved in the management of the farms finances and business operation to develop a clear understanding of where the business is headed and will also enable each of them to contribute to achieving these targets. It is just as important to identify and record what actions need to be carried out to achieve these targets so that you can develop a plan of how best to achieve them. The Drought Module located on www.farmpoint.tas.gov.au provides some example questions to consider when devising a strategic and financial action plan. Part D - Task 1: Setting Targets and Actions Task: Develop targets and actions for the farm business finances Task Details: Based on the information and data that you have generated in Parts A, B and C of this module develop a set of targets and actions for the farm business finances. Document these targets and actions in the tables on page 15 and 16 or alternatively develop your own table in which to record these targets and actions. The targets that you set should be realistic and achievable and should aim to achieve outcomes which can be easily measured. It is also a good idea to assign responsibility for overseeing the achievement of each target to one or more members of the farm business and to set approximate time-frames for when each target will be achieved. In documenting your short, medium and long term targets it would be worth considering what your overall strategic objective or vision is for your farming enterprise. If you require further assistance from a financial professional or do not fully understand any aspects of your farm finances then it may be a good idea to set one of your targets as being to engage someone with financial expertise to help you to work through that particular issue. Note: The goals and targets that you set can change over time as the farm business changes. In this case it is necessary to review targets and actions at least annually to ensure that they remain relevant and achievable. June 2011 19

Overall strategic objective Short Term Targets: 1-5 years Target Actions to Achieve Target Measure to Assess Progress Towards Target Responsibility Expected Date of Achievement 1. 2. 3. 4. 5. 6. 7. 8. Medium Term Targets: 5 10 Years Target Actions to Achieve Target Measure to Assess Progress Towards Target Responsibility Expected Date of Achievement 1. 2. 3. 4. 5. 6. 7. 8. June 2011 20

Long Term Target: 10+ years Target Actions to Achieve Target Measure to Assess Progress Towards Target Responsibility Expected Date of Achievement 1. 2. 3. 4. 5. 6. 7. 8. Review Schedule for Financial Targets and Actions Targets and Actions to Next be Reviewed by: Next Review Date: Completed: Date Review Completed: Yes Checklist for Completing Part D Task Completed Yes No I have set short, medium and long term targets I have identified a process to review targets and actions relating to the farm business finances June 2011 21

Part E: What Comes Next What do I do once I have completed the financial module? It is important to continue to monitor and review the financial performance of the farm business over-time. To do this it is necessary to keep accurate and up to date records of all aspects of the farm business finances. It is recommended that you use these records to re-do the tasks in this module on an annual or seasonal basis. This should help you to build a long-term picture of how the farm finances are performing and will help you to identify the strengths and weaknesses in your farming operation that influence its financial performance. In addition this will provide you with meaningful information which you can use to make more informed operational and business investment decisions. Completing other property management planning modules will also help you to observe trends in the productivity of your property and over the long-term you should start to see links between the performance of your farm finances and the management of other aspects of the farm business. You can refer to the Property Management Systems Framework Guidelines Booklet 3 for a template to start. If you think you may need further assistance in managing your farm finances then you should seek assistance from someone with financial expertise. Refer to the other point of contacts as provided in Appendix 5. Alternatively, there are many private financial advisers, accountants and agricultural consultants that should be able to help you in analysing and managing your farm businesses finances. Checklist for Completing Part E Task Completed Yes No Have I sought further professional advice if required I have made a list of further information that I require and will follow up on this June 2011 22

Appendices Appendix 1 Farm Pack Electronic versions can be downloaded from the following websites: Tasmanian Farmers and Graziers Association, www.tfga.com.au Farm Point, www.farmpoint.tas.gov.au Appendix 2 Enterprise Action Plan Cash flow projection spreadsheet Electronic versions can be downloaded from the following websites: Tasmanian Farmers and Graziers Association, www.tfga.com.au Farm Point, www.farmpoint.tas.gov.au Appendix 3 Risk Assessment Checklist Electronic versions can be downloaded from the following websites: Tasmanian Farmers and Graziers Association, www.tfga.com.au Farm Point, www.farmpoint.tas.gov.au Appendix 4 Gross Margin Toolkits Electronic versions can be downloaded from the following websites: Tasmanian Farmers and Graziers Association, www.tfga.com.au Farm Point, www.farmpoint.tas.gov.au June 2011 23

Appendix 5 List of Useful Resources and Contacts These lists provide an indication of some of the useful resources and tools that are available to assist you in better understanding the farm business finances. Many other commercial and non-commercial tools can also be accessed to help you better understand the farm business finances. Farm Finance and Cash Flow Projections Tool Tool/ Resource Published By Further Information Farm Pack New South Wales Agriculture www.dpi.nsw.gov.au/agriculture Enterprise Action Plan Livestock Gross Margin Tool Crop Gross Margin Tool Business Design Tool Sheep and Beef Cost of Production Calculators Department of Agriculture Forestry and Fisheries Department of Primary Industries, Parks, Water and Environment Farm Point Department of Primary Industries, Parks, Water and Environment Farm Point Department of Primary Industries, Parks, Water and Environment Farm Point Meat and Livestock Australia www.daff.gov.au/agriculturefood/drought/rfcs www.dpipwe.tas.gov.au www.farmpoint.tas.gov.au www.dpipwe.tas.gov.au www.farmpoint.tas.gov.au www.dpipwe.tas.gov.au www.farmpoint.tas.gov.au www.mla.com.au Contacts for Further information on Farm Business Financial Service in Tasmania Service Provider Rural Financial Counselling Service Tasmania Department of Primary Industries, Parks, Water and Environment Department of Economic Development Tourism and the Arts Contact Details Phone: Hobart Office- 6272 5992 Launceston Office 6334 2768 Website: www.rfcstasmania.com.au North West Office 0419 138963 Phone: 1300 368 550 Website: www.dpipwe.tas.gov.au Phone: 1800 440 026 Website: www.development.tas.gov.au June 2011 24

Farm Point Tasmanian Farmers and Graziers Association Private Service Providers and Agricultural Consultants Agribusiness bankers and accountants, financial planners Property Management Systems Framework Website: www.farmpoint.tas.gov.au Website: www.tfga.com.au Phone: (03) 6332 1800 Many private service providers and agricultural consultants exist which may be able to assist you in better understanding the performance of your farm business. Refer to the Yellow Pages under Farm and Agricultural Advisory Services. Your own accountant, financial planner or agribusiness banker may also be able to assist you in better understanding the performance of your farm business. Provides Guidelines, Standards, Legislation overview and modules for Property Management Planning. Refer to www.tfga.com.au June 2011 25

Appendix 6 - Glossary of Terms: Base Level Property Management Plan A property management plan that incorporates the core property and farm business planning considerations that are likely to be relevant to most properties and farm businesses. Further information can be found in Tasmanian Property Management Planning Framework Booklet 2 An Explanation of Property Management Planning. Benchmarks A point of reference which other things can be compared against Biodiversity values Special plant and animal life and or geological or landscape features. Cash Flow Projection A projection of the total amount of money passing into and out of a business Climate change Change in long-term climatic conditions Enterprise A business, project or undertaking Expenditure The spending of funds External party A party which is not directly involved in the management of the property or farm enterprise Financial Analysis An examination and interpretation of finances Gross Margin This is a measure of returns made to the farm business from the sale of goods (gross income) after you have taken out the direct cost of producing those goods Projection An estimation or forecast Property Management Planning A process undertaken by land managers which involves planning and documenting management strategies to enhance the productive and sustainable management of a property or farming enterprise. Viable Something that works successfully or is feasible. Self Management Tool A tool used for self assessment and or self improvement and management Strategy A plan for achieving an identified outcome June 2011 26

Sustainable Continues overtime Succession planning A process of planning for events following on from those that currently occur Trigger points A point which causes a change in events References: Constable. S, Hamilton. J and Nash, (1999) Farm Pack, pp.1-16, (New South Wales Agriculture) Concise Oxford English Dictionary, (2006) Oxford, New York, Oxford University Press June 2011 27