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Starting your budget Key budgeting dates Involve staff and stakeholders Additional resources

Budgeting provides clarity and control over your finances, helping you make confident decisions and achieve your business goals. Budgeting for your dairy farm involves forecasting income and expenses, including milk and stock sales, farm costs, loan repayments, and taxes. Keeping accurate records is essential for reliable forecasts, and involving key partners and rural professionals can help maximize productivity and profitability.

Starting your budget

To get you started you will need to forecast the following items:

  1. Income
    • From all sources, e.g. milk, stock sales, other farm-related income.
    • Use past production data (ideally a 3-year average) to help set realistic income targets.
  2. Expenses
    • Farm working expenses.
    • Interest and lease payments.
    • Forecast expenses based on current cost trends.
    • Any key farm policies or procedures that may impact spending.
  3. Loan and financial commitments
    • Loan repayments (principal only).
    • Drawings.
    • An allowance for tax.
  4. Capital expenditure
    • Planned purchases e.g. livestock, motorbikes, infrastructure upgrades.
  5. Planning and records
    • A stock reconciliation.
    • A management calendar.
    • Accurate records such as past annual accounts, cashbooks and bank statements, budgeting tools, input from key partners or rural professionals.

Reviewing historical data is a great start. Some aspects of your business will remain the same and won’t require changes to the amount of money you need to spend making forecasting an amount easier.

Talk to your banker or Chartered Accountant to gather your historical data or have a look back on past DairyBase reports.

If it is your first season operating your business reach out to your accountant, bank manager, or local DairyNZ regional team member. They can help guide your budgeting process and ensure you're considering all relevant factors.

Key budgeting dates

Throughout the year you need to prepare, review and update your budgets: monthly, before your financial year starts or season begins, at season end and when change occurs.

Monthly

Update and monitor actual income and expenses against what was forecast.

Two or three months before your financial year or season begins

Create annual and monthly cash flow budgets for the upcoming season. Identify potential capital expenses and assess their financial impact. Compare these options to determine which offers the best return on investment (ROI) and prioritize purchases by their importance to the business e.g. are they required for compliance.

Season end

Compare actual to forecast figures for the season finishing, use these to inform your forecast budgets and farm management plans for the next season. This is also a good time to review key performance indicators.

When change occurs

  • Milk income is reforecast - keep up-to-date with milk company announcements and calculate the impact the change will have on your budget
  • Expense cost variations - fuel prices increase, feed costs change from what you had planned
  • Major unplanned expenditure - new tractor, additional bought in feed
  • Unexpected changes to production or adverse events - floods or drought

Involve staff and stakeholders

Engage your staff and other key stakeholders in relevant parts of your budgeting process. Be transparent about expenditure levels and ask for ideas on how to make cost-effective decisions.

Working in a business inevitably means working with other people who will have direct and indirect influences on how your business performs and how well (or poorly) you are able to stick to your budget and achieve business goals.

It may be useful to develop a farm finance policy staff have access to and ensure they understand spending decisions, delegated authority and desired outcomes.

Sensitivity analyses are also an important stakeholder communication tool.

Take advantage of the rural professionals who support your business (banker, Chartered Accountant, farm management consultant, veterinarian, supply store staff, and company representatives). They can provide you with a range of valuable information on market trends, input costs, and general advice on how to fine-tune your business to be productive and profitable.

Developing and maintaining a budget

Last updated: Dec 2023
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