Many primary producers operate their business as directors of a company without committing to fully understand their role and requirements.
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Traditionally, accountants have been relied upon to translate reports, provide analysis of financial positions and manage taxation options.
Like many others, concepts such as monitoring internal performance against strategic goals and targets, while reviewing performance regularly in the context of an ever-changing operating environment is not language normally used within our business.
As small business owners we have made the effort to document policies and procedures to ensure compliance with external legal and accounting requirements. We are continually educating ourselves and upskilling our knowledge about important issues such as workplace health and safety.
However, having recently benefited from a QRRRWN-sponsored Australian Institute of Company Directors course in governance essentials, it seems more effort is needed. Aside from production benchmarking, agriculture would benefit from collaboratively working to improve business practices.
COVID-19 exposed a number of business practices that were being neglected or not up to speed. Businesses without good financial literacy or cashflow forecasting practices in place struggled. Already there is a significant increase in the number of insolvencies predicted for the December quarter.
Company directors are expected to use data to manage performance and assess risk to ensure they adapt and survive. There is an expectation they have the capacity to respond and capability to deal with the right things at the appropriate time.
Most producers would feel comfortable they are able to respond to the challenges they face in the paddock. However, when putting a business hat on, not understanding their true financial position can be overwhelming when planning and making decisions.
Currently interest rates and commodity prices are favourable, but what will happen when the outlook for either changes?
Understanding the numbers, identifying strengths and weaknesses and reviewing the performance and margins of every enterprise within a business is necessary when setting financial goals.
Difficult conversations must be attempted, risks identified and mitigated. How do you define success for your business, agree on your vision and set goals without good communication channels? Unresolved succession planning is a business risk and financial literacy is a strategic management tool.
The best time to plan for a crisis is when we're not having one. COVID-19 reminds us we cannot predict when they occur.
For those trading as company directors, there's no better time to ensure you're operating as one.
- Brigid Price, Rural Resources
