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How do you measure the money performance of your farm?

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  • 03-12-2023 9:36am
    #1
    Registered Users Posts: 1,531 ✭✭✭Finty Lemon


    changed from suckling to calf to beef over the last 5 years and the farm is throwing off more cash. Hardly life changing money but it puts a bit more justification for the rooting that goes on at weekends.

    Maybe that’s down to beef price, but stock sales and cash are better.

    Got me thinking, what is the best measure of overall farm money performance? What are lads using to keep an eye on the value of the operation?

    overall net profit

    profit per head and per hectare?

    profit per hour?

    per owned ha or per ha farmed?

    free/spare cash in the bank?

    return on capital or equity?

    probably different for dairy, beef etc but would be interesting to compare. No figures please, just a guide on which measures work best and why?



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Comments

  • Registered Users Posts: 155 ✭✭windowcills


    I would calculated profits based on if dad bought us icecream on the way back from the sales yard



  • Registered Users Posts: 5,222 ✭✭✭Grueller


    I have a very basic view of it really. Have I more money in the bank at the end of the year than at the start? If yes then I am happy enough. The discussion then turns to progress made. In 2023 I spent €20k upgrading cubicles and €7.5k on 2 machines. I know strictly that is a capital allowance write off etc but they were bought/built from cash flow during the year so I am counting them.

    I am a mixed dairy/beef farm so then everything else is divided over ha farmed to give a figure. I then compare that to the top operators and get put back in my box, but I am happy enough generally.

    Just 2 questions on your change of system finty. Not looking for figures, but roughly what percentage more profitable is the calf to beef than suckling? The second question is, what is the workload like comparatively between the 2 systems? Feel free to not answer if you like.



  • Moderators, Society & Culture Moderators Posts: 3,815 Mod ✭✭✭✭Siamsa Sessions


    I’d say use whatever you’re comfortable with, so any of the examples you give should work.

    And I’d say the only comparison you should make is with your own figures from the previous year. Forget the “industry” or eprofit monitors or what the demo farms in the IFJ are doing.

    For what it’s worth, I do an asset sheet at the end of the year and see if there’s more there this year compared to last. I’ll throw up a screenshot when I’m at the laptop again but it includes cash in the bank, stock value, outstanding loans, tractor/shed depreciation, etc.

    I’m trying to build up capital inside the gate and drawing nothing so this way suits me.

    Trading as Sullivan’s Farm on YouTube



  • Registered Users Posts: 11,165 ✭✭✭✭wrangler


    I'd be the same, I'd have all the bills paid on the 31stDec and then I'd know by the bank statement what the position was,

    I retired earlier than I thought I would so have a lot of depreciation to go against tax. Inland revenue will only allow you claim on a minus income for three years. We're only farming 10acres here and still have the same machinery and farming costs as we had on 120 acres , No point in claiming against the lease as it's tax free anyway. There probably is some creative accounting way around it.

    With the tax system in this country you're nearly bullied into spending money on luxuries on the farm



  • Registered Users Posts: 13,827 ✭✭✭✭Danzy


    I grew up with measurements in inches but have converted to millimetres for greater convenience and accuracy.


    If I can keep the payments is how I view it now



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  • Registered Users Posts: 1,531 ✭✭✭Finty Lemon



    Percentage changes are dangerous when you are starting from a very low base, but I reckon since the change in system the farm profit has increased by about 200-250%. Cause and effect? I am still picking my way through the fact that beef price has moved so much in that time, as it would have been up for the previous system too had I stayed where I was.

    But total live-weight sold off the farm has increased and while the cost of inputs have rocketed, use of inputs hasn't changed by that much. So I reckon after all that that the change in margin is very much driven by altering the system.

    As for workload, it has probably halved at least. 6 to 8 weeks of effort when milk is being fed in spring and once you get that right and calves settled on grass it's way simpler overall. Scouring calves at grass one year was nearly a deal-breaker but we have that sorted. Still much less than calving cows. Honestly, the biggest negative was getting used to not owning your own good breeding stock.

    I'm looking more at the numbers more now and want to see what's the best way of gauging the change. But like was said on here, no point comparing against dodgy numbers from other farms.



  • Registered Users Posts: 54 ✭✭1848


    Need to allow for fact that on most well run dry stock farms income from cheques in the post has decreased over time especially with ents. These types of farms are usually not suitable for environmental schemes - in the past REPS suited them. Used to be the case that the aim was to keep cheques in the post as profit. Now have to make a decent profit from actual farming - say €500/ha net margin. Profit monitor very useful way of measuring this. If you don’t benchmark yourself against industry norms then how do you know where you are going?



  • Registered Users Posts: 1,804 ✭✭✭older by the day


    I'm much the same. This time every year I look at my aib account. I take 20000 out and put it in a deposit account. This year it went to the 10 year bond in the post office. Dirt free.

    The rest is left in aib. It's a simple system but at least I have something after a year pulling and dragging.

    Over the years, you have a nice retirement fund



  • Registered Users Posts: 120 ✭✭Farm365


    Are you not taxed on the 20k as drawings?



  • Registered Users Posts: 1,804 ✭✭✭older by the day


    You are taxed in your income of course.

    My strategy might not be right. I have a pension. Which would saves tax but I also want a rainy day fund. When I was younger and had to build up the farm and build a dwelling house of course I could not do that.

    But my simple reckoning is that I am spending too much if I can't save my SFP, ANC, ACRES . surely the cows and cattle should be able to pay for themselves and help run the house.

    I would be careful with money it was the way I was reared.



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  • Registered Users Posts: 11,165 ✭✭✭✭wrangler


    You'd need to earn 40000 to have 20000 to put into savings, as inland revenue would take the other 20000 as tax because that's the tax bracket you'd be in if you had a spare 20000



  • Registered Users Posts: 2,477 ✭✭✭Jb1989


    Without being nosey can you elaborate on the tax side of 20000. Had you 40000 to begin with like wrangler said?



  • Registered Users Posts: 8,611 ✭✭✭Mooooo


    If lads are talking about year end, what's left in a/ c assuming all bills paid would include tax paid so whatever is there can be allocated for whatever re investment, saving, cover bills for first few months if dry/ not selling etc. Although if profits are up and looking poorer the following year prob prudent to put some away for the tax bill or rainy day fund if possible

    Re measuring financial performance, once you are consistent in the way you measure it yourself from year to year is prob most important.

    Profit per hour worked can be suitable for some, maybe moreso for those working off farm as time may be more of a limiting factor altho for most of us it may be a depressingly enlightening figure and maybe something we should all look at more

    Profit per ha or unit sold or c/ L may be more important if looking for improvements across your sector or system to apply to your own operation.

    At the end of the day covering its costs, including required reinvestment either by repayments or cashflow, and being able to bring something back to the house is the key,



  • Registered Users Posts: 1,155 ✭✭✭MIKEKC


    You say cows and cattle should help run the house so I presume there is another income coming in.



  • Registered Users Posts: 1,531 ✭✭✭Finty Lemon


    Good point that farming the schemes may not yield a s much as previous. Take what's coming I suppose, but I'd be concerned that the farm will run down over time if the focus is just on meeting ACRES rules etc. Most are retirement schemes in disguise. You are also handing the decisions over to a farm consultant.

    For monitoring annual performance, I'm thinking of taking land owned as a reference point and costing/valuing all profit/losses and changes relative to this. If land is rented in future it will be costed against this reference. Then its margin per hectare for a fixed amount of labour (about 500 hours a year). Maybe this will take the craic out of the farm but I'd expect the opposite.



  • Registered Users Posts: 10,807 ✭✭✭✭patsy_mccabe


    Well an accountant would do the following;

    • Income statement / Profit & Loss
    • Cash flow statement
    • Balance sheet

    The income statement would show the profit for the year. This would be all incomes minus all costs. The problem with this is, not all costs involve money coming out of the farm account, there are non-cash expenses such as machinery and building depreciation.

    The cash flow statement is really a track on actual money moving in and out of the farm account. It also takes into account bills you owe and having paid for at year end and also bills owed to you. It also accounts for the non-cash expenses you put in the income statement.

    Balance sheet is a list of assets and liabilities.

    The great thing about doing all 3 is, you can account for every Euro spent of the farm.

    For example you could get a large income tax bill, but there's no money to pay it in the farm account. You look at the cash Flow statement and you can see that you spent the profit on a new shed and a new mower.

    'If I ventured in the slipstream, Between the viaducts of your dream'



  • Moderators, Society & Culture Moderators Posts: 3,205 Mod ✭✭✭✭K.G.


    I ve my own kinda system of measuring how we are doing.anything for living in the year I count as money made and that includes anything spent on the house or cars or payments towards them.i regard anything spent on buildings or infrastructure spent on the farm as a cost but I do regard the Increase in stock as wealth gathered and earned.heres the funny one I think the value of the extra land we bought as money earned but I regard the interest as a cost.my system is based on the idea on the idea that if I stopped farming tomorrow what would get money for minus what we started with.its entirely my own system but I kind a have a running total on wealth we have gathered since we started



  • Registered Users Posts: 8,245 ✭✭✭funkey_monkey


    Farm theory done a video on finances last week. Aimed moreso at the dairy sector so I tuned out.

    I wouldn't do anything more than look at the annual accounts. It would tell me all I need about what happened in the year.

    The more interesting point would be benchmarking my Farm against others as that would be the real litmus test as to how you are really performing. You might make a profit, but unless you know what the industry average was, then you have no idea whether your farm is efficient or wasteful. Likewise, you might make a loss but if your loss is less than majority of the industry, then you can say that you have had a decent year, comparatively speaking.

    Where this data can be obtained from is the big question though.


    The AHDB use cost of producing a kg of beef as their metric for non dairy systems.



  • Registered Users Posts: 1,804 ✭✭✭older by the day


    Comparing yourself with others is a road to disappointment. Always someone with a nicer wife, or nicer tractor or better cattle dog LOL

    No matter what rules you use, land types, stocking rates, full time/part time, cow type. Comparisons can only be made with farms that are much the same as yours.

    If you want to put all your spare income back into the farm that's fine, it will save tax wise. If you want to build a rainy day fund you will be saving after tax. But it will be there if an opportunity arises. IE. A bit of land comes up for sale,College fund, or illness. I'm the type who likes to have something if things change



  • Moderators, Society & Culture Moderators Posts: 3,815 Mod ✭✭✭✭Siamsa Sessions


    I’m the same - I sleep easier when I know I’ve a few quid put away in case tis ever needed

    Trading as Sullivan’s Farm on YouTube



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  • Registered Users Posts: 18,653 ✭✭✭✭Bass Reeves


    I think it can be hard to look at what is profit or not profit.

    I do an assessment on the margin cattle leave. I figure my yearly cost per head is 450 ish/ year. I have a sheet with the cost per head cattle cost coming in and there slaughter values going out. At present I have a gross margin 750+ on average giving me a net margin of 300+/ head. I do an assessment on against replacement bought in as well

    The biggest thing to be able to assess is what expenses that go through the tax system which you might otherwise have to pay out of non farming income.

    For instance up to 66% of motoring expenses (100% if you have a commercial vehicle) are written down against tax. Add to that electricity, phone maybe sone heating expenses as well. For 8-9 years at least one of my children's worked as a farm employee. This helped fund there college education. The farm insurances covers the dwelling house as well.

    The 10-20k in savings may come from external income but the farm picking up day to day expenses may have allowed for that.

    Slava Ukrainii



  • Registered Users Posts: 385 ✭✭SodiumCooled


    My understanding is that would only be applicable if you have the farm under a limited company (or similar). As most farmers are sole traders all income and expenditure to the farm account would be gone though in your tax return.

    Thats how it works for us anyway.anything in the farm account has been submitted in the tax return (albeit a year behind of course due to the way taxation works).



  • Registered Users Posts: 1,837 ✭✭✭Castlekeeper


    Plenty variations of sense above. Financial metrics can be touted as the be all and end all. A lot of this started with the New Zealand style farming became fashionable which encouraged a very colonialist, exploitative type of agriculture.

    I always try to remember that some money just isn't worth making.



  • Registered Users Posts: 239 ✭✭tikka16751


    The reg plate of the newest tractor will put you into the right ball park anyway.



  • Registered Users Posts: 5,222 ✭✭✭Grueller


    Ya, tells how much money is leaving the farm on heavy metal disease and hurts the financial performance.



  • Registered Users Posts: 2,040 ✭✭✭Sheep breeder


    The most important thing about profit is that there is a life outside farming, like time for holidays, family, a bit of craic, life is for living and a few bob for the retirement. How many men slave and grab all they can get and when there gone what was it all for. Health is the biggest wealth in life and no profit monitor can buy health, we are four years going to Crumlin hospital with our daughter and that puts perspective on life.



  • Registered Users Posts: 1,531 ✭✭✭Finty Lemon


    Agreed 100%, but the notion that slaving on farms drives profit is not accurate I think. Quite the opposite in fact. Profit is not gained by pushing the last out of yourself, it comes from being well set up and making good decisions in the right areas. Stock, grass, planning. I hate to see people missing out thinking they are progressing, only to be working hard for the bank, machinery dealership or the merchant. Time with family is too valuable for that craic, as you certainly know more than most of us. All the best in that regard, SB.

    In relation to some other posters, the idea that new machinery equals success is way off in my experience. We all know plenty of struggling farms with new kit in the yard, all on HP of course. Bad stock, hungry land and a new JD6120 sitting in a kip of a yard.

    And since when did keeping track your farm profits become a colonialist and exploitative? Are we supposed to live in some sort of utopian penury on the farm? Jaysis.



  • Registered Users Posts: 4,011 ✭✭✭Kevhog1988


    Listening to the pasture pod lately. The time series is very good if anyone is interested. Lean management and how to increase profitability. I think a lot of us are part time farming so its a great listen and plenty to be took from it.



  • Moderators, Society & Culture Moderators Posts: 3,815 Mod ✭✭✭✭Siamsa Sessions


    Anyone keep track of how much time they spend on the farm every week?

    I’m at around 18 hours/week on average across the year. Busier in spring and quieter into autumn. 30 calves and 30 cattle on 30 acres, in one block around the yard. Lots of fencing/paddocks being set up and poor enough sheds for winter housing.

    Trading as Sullivan’s Farm on YouTube



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  • Registered Users Posts: 1,531 ✭✭✭Finty Lemon


    About 600 to 650 hours a year I reckon for small to medium scale cattle farm.

    Biggest labour savers

    Overall- selling the sucklers and the diet feeder, moving away from all bales.

    Spring - contract out slurry, having paddocks fairly well set up

    Summer- getting calves down to very little meal for a couple of months. Mid May silage- pit silage for 2 main cuts. FEC's for dosing

    Autumn- starting forward cattle on meal at grass to get some away early. 30ft wheeled trailer troughs

    Winter- A JCB 530 loader for the pit and no diet feeder.

    Not one of them an original idea, all picked up from a lad doing Fr and AA cattle for a good number of years. Copy and Paste.



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