Are your assets working hard for you?
Why should you review farm assets?
The Farm Business Survey defines assets as anything of value in the possession of the business and claims on anything of value in the possession of others. The total fixed assets on a farm include milk and livestock quotas, as well as land, buildings, breeding livestock, and machinery and equipment. For tenanted farmers, assets can include farm buildings, cottages, quotas, etc., where these are owned by the occupier. A liquid asset is cash in hand or assets that can be readily converted to cash, such as that owed by sundry debtors.
Making an inventory, reviewing our assets and being aware of their value helps us to make the most of them. When the assets of a business are valued, it is normal practice to use the current market value. We can also identify assets that are not making a full contribution to the farm business. There may be opportunities for diversification, contracting, sub-letting, hiring-out. Maybe there is are empty buildings that could be put to more effective use, or a piece of kit that could be rented out when not in use, or even a lake that can be used for fishing. There is a good chance that there may be opportunities that are unique to your farm that have not been explored.
Occasionally grant opportunities will be available for you to access that will allow you to invest in your farm assets, thereby enhancing the financial resilience and sustainability of your farm.
Balancing our assets against our liabilities also allows us to determine the financial stability of our farm business. It is also important to understand the relationship between the value of purchased assets, any interest payments and the rate of depreciation.
Look after your assets – not only do they have a potentially large value, there is also a risk of serious depreciation if you don’t look after them. Are your assets properly and fully insured and protected against various unexpected and unwanted events? Do you know their proper and full worth?