A group of Victorian Mallee growers are putting their heads together to boost their financial planning performance and learn from each other’s business approach.
The five growers, who were encouraged to form a peer learning group by former consultant agronomist and Annuello grower Peter Aikman, collaborate using business management software called P2PAgri, which automates budgeting processes.
“Nearly everyone in farming is running a multimillion-dollar business these days. It’s not uncommon to have a $50 million asset base, which is big enough to be listed on the Australian Securities Exchange (ASX),” Peter says.
“There wouldn’t be any chief executives of ASX-listed companies that haven’t had any financial literacy training, or done some training in finance or economics, whereas it would certainly be the minority of farmers who have done training in that field.
“Most farmers are very practical, hands-on people. I’m not saying it’s right or wrong, it’s just that many growers probably haven’t had time to spend upskilling themselves in that area.”
Financial literacy is key
Peter, who grows wheat, barley and legumes on 3000 hectares in north-western Victoria, says the growers had all identified the importance of financial literacy. They use the business management software to track the current season, plan the following year’s rotation, and evaluate potential investments in machinery and property, among other things.
“We try to focus on the financial aspects of the business. The bigger-picture stuff: what our return on assets and return on equity are, what our net profit ratios are, what our investment in machinery is.
“As you get into it, you realise it’s not a competition within the group – it’s competing against yourself year on year with your numbers. And looking at other people’s numbers – not to think you’re better or worse, but for inspiration and looking for opportunities to improve their business, as well as yours.”
Peter says financial planning is often learned within a small circle. “If all that my father knew about finance came from his father, and all I know is from my father, it’s a fairly shallow pool.”
The farming operations involved in the peer learning group range in size from 2500ha to 18,000ha.
“It’s a range of different business structures and different sizes,” Peter says. “But what we’ve all got in common is that we think financial literacy is important and we all knew that we wanted to compare and improve. That’s the common ground and we all dedicate enough time to it.”
Part of Peter’s initial efforts to improve his financial literacy was reading a book called Farming the Business, a GRDC-invested business management publication released in 2015.
“I used it as a resource to understand financial literacy. A lot of people get lost in the terminology, because there’s so many different names for similar ratios. Farming the Business was a great resource and learning reference to understand some of the terminology and methods better.”
More information: Farm Business Management guides.