Finance with Don Fraser Fraser Farm Finance

Whatever way you look at it, on most farms often there is very little good governance.

Governance means ‘the act or manner of governing', in other words, the control.

For the farmer, this means identifying and documenting all that happens on a farm. It must be considered best practice and lead to better systems and reporting.

As a trustee of a number of farms, I find improving governance fascinating. Again – as I always say – the best way to achieve this is to call a meeting with all your professionals. Have an agenda and discuss each issue in detail. Here are some starting points for the meeting:

1. Ownership structure
What is it and is it the best for the owners and the property? If it is a Trust, are the Trustees doing their job and are the minutes kept? Are there issues around gifting and who the succeeding Trustees are?

2. Analysis of balance sheets
This is always a good place to start too. Ask the accountant to verbalise a report and discuss how it compares to previous years. Also, get him to identify any blow-outs and what could be improved.

3. Budget for the coming season
How does this look and is it realistic?

4. Stocking
Is the farm carrying the correct number and are they being adequately cared for? Are there any liabilities here?

5. Fertiliser
Is there sufficient going on? Is the asset being maintained? Table some soil tests and discuss. Does the farm need more fertiliser? Is the lime input adequate?

6. Effluent disposal
This is a big one. By law, you must now have an effluent diary to record all activities. This is a daily diary too. Should the farmer be using the new dairy diary? Are the ponds big enough? Are they sealed?

It looks likely that soon all ponds will have to be lined with bentonite clay or an approved liner. Various authorities are now bringing in pond ‘size calculators'. Has the effluent disposal system been discussed with the Fonterra rep? Ensure you get this one right as there is liability everywhere if you do not.

7. Wills and lists of wishes
Are these done and up to date? Where are they kept and who are the succeeding Trustees?

8. Powers of Attorney
Are these in place? Who has the PoA and is the Enduring Power of Attorney done?

9. Leases
Are there unwritten leases between entities in your business? ie: does the partnership lease from your Family Trust? This needs to be independently assessed and formalised. Are you leasing from a neighbour on a hand shake? Not a good business idea really.

Finally – and the most important point – is to record all the minutes, keep copies and file them. Copies should also go to the banker if they are not present.

So, in conclusion, farm governance will be the new ‘buzz word'. It takes organisation, effort and focus. It can be fun and very rewarding, but records need to be kept. As best practice it nullifies liability for all parties involved – ignore it at your peril.

These are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.
Don Fraser is the Principal of Fraser Farm Finance and a consultant to the farming industry.