31st May, 2018
Kiwi farmers are facing unique market challenges. It’s time accountants engage with their agribusiness clients in new ways so that both sides can develop a more sustainable business outlook.
Agribusiness is often seen as (pardon the pun) dyed-in-the-wool traditionalist. Some New Zealand regions seem untouched by the passing years.
However, the stoic approach of those who make a living from the land belies the constant volatility they face.
Even as we enjoy a softening dollar and good commodity prices across the board, the sector is exhibiting almost bipolar behaviour, with key indicators and external factors often pulling in completely different directions and it’s by no means plain sailing for business owners and their advisors.
For example, in spite of near-record low business confidence, almost a third of rural businesses expect revenue to rise in the next financial year.
Then there’s the clash of solid dairy prices pushing up against the recent ‘big dry’, regulatory pressures stepping up and recent biosecurity issues.
Despite international and domestic political uncertainties, rising fuel prices, biosecurity issues, climatic challenges and possible immigration cuts, the recent MYOB Rural Business Monitor showed the sector continues to demonstrate resilience, albeit with most indicators from the Business Monitor slipping back somewhat from 2017-18. Rural NZ also trails their urban counterparts.
The increasing pace of change in the industry against this turbulent backdrop leaves the sector in need of quality advice and the right tools to ensure continued success and presents a raft of opportunities for advisors to engage with their clients.
Outside the usual activities of a rural accountancy practice, new technology and the farming environment mean advisors need to work with clients on broader topics. We’re talking beyond the annual accounts and keeping Inland Revenue happy.
With financial and production data at your fingertips (thanks to cloud-based accounting and other industry software), conversations need to move from an end-of-year approach to a real-time one, and from a tax-and-compliance approach to a management focus.
Here are some conversation starters to help this shift with rural clients.
Reports vary on how many farmers have a budget, but having a budget where the owner/manager, funders and advisor are all committed to it is the benchmark.
Budget support is now timely with beef and especially sheep returns being strong. Some farmers are heading for significant tax burdens, above and beyond what they’ve been exposed to in recent times. This means budgeting to have sufficient cash flow available to meet these expenses.
Additionally, with an aging farmer population, the very real challenge of succession planning requires advisors to sit down with clients earlier and run scenarios out over longer time periods to make sure the business can afford the succession arrangements it’s considering.
It might not be every accounting firm’s core business, but there’s a real need in rural NZ for better support for employers to meet their obligations. There are gaps to fill for rural NZ when it comes to holiday pay, minimum wage requirements, record keeping and employment relations requirements.
Recent inspections found up to 28 per cent of dairy farms didn’t meet record-keeping standards, and there were also issues with minimum wages and immigration. Labour inspection authorities have committed to further checks and enforcement until compliance improves. This could mean fines and stand-down periods.
Advisors have the opportunity to help clients stay on top of payroll compliance. And the win goes two ways, as it creates another revenue stream for your practice.
By setting up as a payroll bureau and using the right online payroll solution to be more efficient time-wise and for productivity, you can drive a consistent profit margin through such valuable client services.
Other advisory worth considering:
The danger of doing nothing is that compliance margins are shrinking. Some firms have embraced new technology to offer very low-cost, no-frills sets of accounts. Price-sensitive clients chase the lowest offer so if they’re getting the basics from you, the best price needs to come from you. Alternatively, you can add value with advisory services.
Having only one touch point and one service offering means you’re opening the door for clients to move firms. How easy is it to make a quick call and have a set of accounts go to the biz down the road?
How about connecting many services that drive lots of touch points? Then moving to other advisors is much more painful. Having these connections with specialists in your business means the key person who has contact with that client can leave and the client still has relationships with the other specialists. The temptation to move their business is reduced. And this way the client receives a holistic approach to their business through one trusted adviser supported by the right specialists.