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Turning the tables when things got tough

 

Like many dairy farmers, Wendy and John McLaughlin found themselves in a difficult position after the challenges of recent seasons. 

With three dairy farms - running two as 50/50 sharemilkers, and a third staffed - their approach has been to also raise enough heifer calves every year so that they could sell a herd, and not rely solely on the fluctuating pricing of milk production. Despite this, they were still facing some resistance from their bank. “They didn’t understand what we were trying to do, and our accountant wasn’t really explaining the numbers side of things to us very well,” explains Wendy.

Unhappy with the advice they were receiving, Wendy and John sought out a new bank, and a new accountant, so reached out to KPMG’s agribusiness specialists Julia Jones and Trevor Knyvett.

 

The power of cloud accounting

Trevor is from KPMG Tauranga, and, as an agribusiness specialist and a farmer himself, he understands the challenges that many of today’s farmers are facing when it comes to their finances - one of which, he says, is data integrity. “Farmers are not necessarily looking at the most up-to-date information. Or, they might have an idea in their head of how they’re tracking and what they’re spending, but they don’t necessarily get the full picture. They can’t see the overall impact on their bottom line, and also how it is building equity over time,” he says.

The practice uses Figured and Xero, and for Trevor, the benefits of cloud software are obvious. With the vagaries of weather and milk pricing beyond anyone’s control, he says that giving farmers access to accurate real-time financial information is essential, so he immediately set the McLaughlins up with Figured to manage their accounts.

 

Taking control of their finances

With Figured, Trevor finds that his clients have a better understanding of their finances and are more inclined to be actively involved in tracking and monitoring their budget.

“Previously, it was more us prompting them, but now we are seeing that our farming customers are more proactive in their own right. They’re making Figured work for them, planning ahead themselves, and getting those plans into the system, rather than on a bit of paper or in their head.”

Wendy admits this was previously true for her and John. “John had our plan in his head, and he knew the business was breaking even, but we couldn’t see specifically where the money was coming and going.”

Although the McLaughlins were already using Xero, they wanted to take care of more accounting tasks themselves. Wendy explains, “I wanted to do the coding and GST. Previously, we’d get the books back from the accountant and it wouldn’t quite add up to what we thought things should have been.” Trevor took the couple through managing their GST with Xero, and with everything translating into Figured, their reporting is now much more accurate and efficient.

It’s also meant the McLaughlins can code their expenses to a specific operation, giving them a much clearer picture on the performance of each farm. “Now we can see how much money is going out for each, how much each of them is making, and ensure each operation is breaking even,” says Wendy.

 

Clarity over their cash

With this clarity over expenses, Wendy and John have also been able to see where they can adjust their spending.

“Because they can pull out items on a line-by-line basis, they know where they can save money. We sat down and went through their plan together, and there were a few expenses that we were really able to challenge,” says Trevor.

In fact, John and Wendy were able to pull nearly $60,000 off their expenses within a year.

“If you didn’t have everything down in a system like this, you wouldn’t be able to look at the numbers and ask yourself ‘is this right? Is there a better way to do things?’”, explains Trevor.

 

Better banking relationships

When Trevor got the McLaughlins started on Figured, he also took them through what information the bank really wanted to see.

“Figured gives us what we need, but also what the bank wants,” says Wendy. “We’d never worried about that before. But being able to show the bank what we would be able to achieve in two years time, how we would have cleared our debt and be making money, meant we got their confidence and buy in.”

At the same time that they switched accountants, the McLaughlins had also shifted to ASB Bank, and found rural manager, Kieran Cruden, who they say better understood their vision and was more open to supporting what they were trying to achieve. With access to Figured, he could also log in and check that what they had budgeted, and what they were spending, was aligning.

“Figured has allowed Wendy and John to generate instant and accurate information, which has enabled them to improve their understanding of their complex business, understand where their money is going and provide them with the confidence that their business strategy is working. With this up to date information budgets can be compared to actual results and variances identified easily, which allowed them to identify areas of their business that they can tweak and make improvements to. Furthermore, with Figured updating the milk pay out immediately, it provides the bank with confidence that correct and accurate information is being utilised in their budgets and cashflows. Overall, Figured has been instrumental in helping Wendy and John take control of their business and focus on their future goals and ambitions”.  

 

Opportunities and growth

Trevor notes that seeing that their debt was no longer increasing allowed Wendy and John to be more upbeat and refocus on their business growth. “It allowed us to lead into more strategic planning around what they are trying to do long term,” says Trevor. “Rather than just focusing on what’s happened in prior years, we can actually look forward. It’s far more important to be looking at what you’re doing now, and what’s going to happen - what you need to do, where are the challenges, where do you need to put your time and resources.”

With this approach, Wendy and John have since gone on to expand their operations. They’re now looking ahead, taking care of budgets for the coming season themselves, have support from their key advisers, and most importantly can confidently move forward in a profitable position without the stress and burden of debt holding them back.


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