Make your SFP work harder for your farm; farmingfinance.
WITH most Single Farm Payments (SFP) in bank accounts, Welsh farmers could benefit by weighing up a range of options regarding the best use of the funds being received.
Receipt of the funds will, for some businesses, provide a welcome inflow of cash to reduce overdraft balances, which may be running at higher levels than usual following the challenging conditions over the past 18 months.
For many businesses this is the right course of action but for some, there could be other opportunities to make their SFP work harder for the business.
The SFP will have been the largest single credit into many farm bank accounts this year.
Because of this, it's worth considering whether there is any major expenditure (taxation) or key investment pending, particularly in the short term.
If this is the case, it's worth reflecting on whether it would be appropriate to ring-fence some of the funds to keep them separate from your day-to-day trading.
Many businesses will want to pay down overdraft borrowings, particularly if these were increased to help the business manage the effects of the appalling weather in 2012-13, and this is the right course of action.
However if there are upcoming investments in farm efficiency or asset purchases planned in the next few months, then it could be an option to place some of the SFP funds to one side to ensure the planned spending does not get caught up with normal trading expenditure.
Placing the funds in an interestbearing account or short-term deposit may be an option.
Receipt of the SFP could also be the trigger to think about whether it's now the appropriate time to restructure the existing overdraft into a longer-term loan, while interest rates remain relatively low.
This will allow the business to keep moving forward while bringing borrowings into a more manageable structure.
It's best to talk to your bank manager over the next couple of weeks so you are fully aware of all options and can use the payment in the best way for your business. Lloyds Bank's specialist agriculture managers are able to assist those farmers who are considering their options in terms of managing the cashflow and borrowings in their business. Visit www.lloydsbankbusiness.com/agriculture.
Alick Jones is Lloyds agricul-ture policy director
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|Publication:||Western Mail (Cardiff, Wales)|
|Date:||Dec 17, 2013|
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