FINANCIAL literacy should be part of the essential criteria to becoming a farmer in Australia, according to Booth Agriculture co-owner Claire Osborn Booth.
Speaking at the Nuffield Australia national conference in Melbourne, the 36-year-old farmer and succession lawyer highlighted the German young farmer system where trainees need financial literacy to gain a licence to farm.
Her Nuffield investigations into the transfer of farming businesses and their assets, and the role of financial literacy and debt in succession took her to New Zealand, the United States and Canada.
She and her husband Brendan own the mixed farming business Booth Agriculture, producing high quality agriculture, grains and seed crops at Geurie near Dubbo in central west New South Wales.
The operation also includes a separate enterprise to mitigate the risks associated with cropping, that breeds Angus cattle, and trades sheep and cattle depending on market conditions.
At the conference, the 2017 Nuffield scholar also gave some insights into how to be ready for bank meetings and the role of land leasing.
Ms Osborn Booth said aspiring young farmers in German, where farming was a licenced profession, had to study and gain experience before getting their licence and coming back to the family farm.
Young German farm apprentices had to gain a qualification in agriculture, spend 12 months with another farm business and that included time with the owner running through their management system and accounts.
“So, when you returned home you not only had some accounting knowledge, but you had some management experience. So, there are some great ways to improve in this area,” she said.
Ms Osborn Booth said NSW was a leader in the financial literacy field with the Rural Assistance Authority’s professional program providing $10,000 for farm businesses.
“So, I believe if people have the will and the desire there are definitely courses out there that you can do.
“I think it’s also a case of spending time with your accountant and saying ‘look you are one part of our business, but I would actually like to understand my numbers, I really need to stand alongside you, I don’t really just want to receive your information, is there something you can do ….?”
Another good option is the Rabobank executive development program and its associated courses. She also regularly lists courses on Booth Agriculture Facebook page.
“If you haven’t done one, I suggest you do, it is fully tax deductible.”
She said courses which were “life-changing” for the Booth Agriculture business were the RSC course ‘Grazing for Profit’, Richard Groom’s course ‘The Farm Business Audit Workshop’, Allan Parker’s Negotiation for Change and (Leadership) Partnership Program and the KLR Marketing course.
Spreadsheets, spreadsheets, spreadsheets
Ms Osborn Booth said one of the top three things she focussed on for her “catch-up” meetings with her bank was: “spreadsheets, spreadsheets, spreadsheets.”
These should include spreadsheets for 12 months and five years, outlining cropping rotations or business plan scenarios covering below average turnover, “what we think might happen” and “what will happen if the moons align”. These should be provided a week before the meeting with the bank.
“So, you are walking in and you are showing you have some awareness of what’s going on and the banker is saying ‘oh my God, I actually don’t have to do that, you’ve actually done that for me, tick’.
“Secondly, it is having a vision, saying well, where are we going, what are we doing? And not just five years, I’m talking 10, 20, 30 years.”
She said she recently went into their bank requesting an interest rate for 15 years.
“We said if you reward me with really low banking margins I will reward you with loyalty.
“They made a phone call and this man came from nowhere and said ‘you talk like a corporate’.
“And I said well no I don’t, I’m a small family farmer, I just want to know where I am going, and that long-term planning, they said, was completely absent.”
Ms Osborn Booth said the third thing was to show that the business was willing to sell assets “if it goes pear-shaped”.
“So, having a 10-point plan – what am I going to sell? Where is it going to come from and how easily can I sell those assets? If the shit hits the fan, this is what I’m going to do,” she said.
“Those three documents provide complete and utter confidence to an equity, whoever that is, that you are going to be a wonderful person to do business with.”
Leasing to offset risk and generate income/profit
Ms Osborn Booth said leasing was a defensive capital play and a way to “leapfrog” to increased turnover.
As a duplication of the current operation, leasing was a way to dilute particular overheads, and increase turnover or the stock numbers for trading and generation of a land purchase deposit.
“Without a doubt, leasing wherever it is, it doesn’t matter, will definitely be something that is an easy way to increase turnover.”
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