Establishing Business Resilience
In preparation for natural disasters it is essential that you maintain sound business fundamentals in place leading up to the event.
This includes the Following:
- Have adequate banking facilities in place.
- Keep up to date and accurate production records.
- Keep good financial records.
- Have insurance in place as well as double checking its the right type of insurance.
- Keep on top of the office paperwork.
- Review your business structure.
- Have a succession plan.
By implementing these core business fundamentals you can potentially save a lot of frustrations during a natural disaster event.
This will allow your business to effectively focus on the disaster recovery process.
Getting Back to Business – 3 Steps to Take
The following three steps details ways in which a business can access funds during times of natural disaster.
- Borrow funds to start rebuilding.
- Government assistance grants.
- Farm Management Deposits.
Ian outlines how these new funds can also be utilised to either repair crop damage or establish a new crop.
This is been a core focus on QRIDA low interest loans in the past to help farmers get back on their feat.
Just keep in mind when replanting to soil test and sap test to ensure there are no nasty surprises left behind from the natural disaster.
Rebuilding a Stronger Business
When building a stronger business it essential to have the right business foundations in place prior to an event.
Natural disaster events are unfortunately part of farming in Australia. With this in mind its important that the right processes are in place to withstand a disaster event.
It is important to consider if you have the right loans, equipment finance and over draft limits to effectively manage debt and the day to day costs if running the business.
Having good achievable cashflows for the business can help both yourself and the bank manager make better decisions.
When you have the right banking facilities in place it will allow the banker to have more confidence in both yourself and the business.
Keeping accurate and timely financial records is an essential component of managing your cashflow.
Having historical information is a important part of predicting future cash flows.
With the right data you can isolate income and expenses to know the profitability of the various parts of your business.
Make sure that you have adequate insurance as well as the right type of insurance for your business.
Its no good after a disaster event finding out that you didn’t have the right coverage.
Make sure that you keep up to date with the lodgment of your BAS.
Keeping up to date with all of the office work is part of being a good manager.
This allows you to have a snap shot if how your business is performing at all times.
Their are a variety of different business structures to choose from with their own unique advantages and disadvantages.
Work out with your accountant which one will best suit your business
Succession planning helps give stability to an enterprise and each member of the business can feel a little more secure about their future.
For further information on succession planning the course by Marina Skinner can help guide you through the process.
Preparing for Natural Disasters
When farming in Australia one thing that we know for sure is that farming systems will experience some type of disaster event during the lifespan of the producer.
Its important to assess the severity of the natural disaster and the likelihood that the event will occur.
Considering the Risk
When assessing natural disasters a risk matrix can be helpful to identify the risk of a particular event.
For example a foot and mouth outbreak could devastate a business although due to strict biosecurity laws in Australia the risk is minimal.
Indirect Impacts of Disasters
Natural disasters can often have obvious consequences although there can also be unexpected consequences.
In the aftermath of cyclone Larry it was understood that there would be devastating damage to crops.
However there was a significant adverse effect on the dairy industry due to loss of electricity.
When preparing for an event it is important to account for these potential impacts.
Each business will have different critical factors to consider during the disaster planning process.
These will need to be detailed in a disaster plan as well as being updated regularly to evolve with the business.
Growcom has a Disaster Toolkit available to help with the disaster planning process.
Elements of a Cashflow
Most cashflows are done exclusive of GST.
When assessing income for a cashflow it is important to assess all types of income sources on and off farm.
This will help the financier paint an accurate picture of how much farm income is relied upon.
How these income sources interact with the business will need to be indicated within the cashflow.
There are three types of income commonly seen within farming systems.
- Off farm income
- Nonrecurring income
- Farm Income
Documenting these and how they interact with the business will help develop an accurate picture of the businesses cashflow.
Expenditure can often be broken down into four separate sub items.
- Variable operating expenses
- Fixed operating expenses
- Finance expenses
- Capital Expenses & other expenses
At times it can be difficult to identify which categories to use to define expenses.
Feel free to pause the video and take a snap shot of how typical farm expenses can be broken down in this way.
When planning a cashflow past years can often act as a guide to predict future performance.
Updating the figures to reflect current prices and expenses will improve the accuracy of the cashflow prediction.
A cashflow is simply a projected flow of cash through a business.
It understandable that you cant predict exactly how much the business will produce.
With a projected cashflow you are predicting the income and costs that you envisage for the business within reason.
What are financiers looking for?
Financiers are primarily assessing the businesses ability to effectively service its debts as well as the timing of the finance needs during the business cycle.
The cashflow will be the primary tool that assists financiers when determining the level of overdraft required for the business.
When developing a cashflow a good template can go a long way. You can access a great Cashflow Template created by the GRDC by clicking the link.
Disaster Business Plan
Its important to identify risks and to determine what preventative measures can be taken in preparation for the disaster.
A structured document ensures that the key people in the business are aware of the issues that need to be addressed during times of natural disaster.
The Rural Financial Counsellors can play a pivotal role in helping develop a plan for your business.
Prevention Options for Recovery
- Building infrastructure
- Farm management deposits
- Gearing your debt levels
An adverse event will most likely happen to your farm business.
Those who prepare well will have a better recovery.
Make sure that you have a recovery plan in place as well as provisioned finances to execute that plan.
If you need help developing your plan the business plan template in the right hand column is a great place to start.
If you need further assistance feel free to reach out to the Rural Financial Counselling service.
Business Plan: A good business plan can help you secure finance, define the direction of your business and create strategies to achieve your goals.
Succession plan: A good succession plan creates a smooth transition between old and new ownership and reduces disruptions to your business when you’re away.
Climate Risk Assessment Template: Explore a framework designed for coastal climates.
Prevent Information Sheet: Reassess and monitor your climate risk.
Climate Comparison Tool: Compare and contrast climates across a variety of different areas.
Bowen Climate Risk Assessment: Discover the level of climate risk for the Bowen area.
Bowen Climate Infographic: A handy infographic outlining climate risk in Bowen.
Emergency Management Plan: How to establish an emergency management plan.
Natural Disaster Information Sheets: Incredibly handy factsheets on natural disasters.