Why waiting for the “right time” can cost more than you think
Making decisions in farming can be one of the most stressful parts of the job. Have you planted the right variety? Should you wait to sell your stock? Is urea worth the cost? Those are just some of the production questions. Then there is the operational side of things. How many staff do you need? Is the interest cost of purchasing land worth it? Should you invest in new machinery or continue repairing what you already have?
Most farmers are well aware of the consequences of making a poor decision, but one mistake we see quite often, particularly when it comes to finance, is making no decision at all.
Finance can be a stressful topic, and financial decisions are often not as pressing as the need to sell livestock or plant seed. As a result, they can easily be pushed down the priority list and left for another day.
From experience, we find that clients often delay financial decisions because they think another season might provide more clarity, or they are waiting to see what interest rates do in the future. The reality is that financial decisions are often pushed aside until they become urgent, whether that is a working capital account running short or pressure from an existing lender to refinance. Waiting until this point can limit your options and create a lot of unnecessary stress.
The cost of missed opportunities
Most of the best opportunities in farming are time sensitive. Whether it is a neighbouring property coming onto the market, the need to upgrade a piece of machinery to reduce repair costs or improve productivity, or a succession plan reaching the point where non farming family members need to be paid out, being prepared can make all the difference.
If you position your business early and ensure these opportunities are within reach, it can be the difference between missing out and capitalising on them.
For businesses that rely heavily on leased land to generate income, this can be a particularly important strategy. If losing that leased country would significantly affect the business’s ability to support the families relying on farm income, we recommend regularly reviewing your finance position and understanding whether purchasing that land would be possible if it ever came onto the market.
To put yourself in a position to capitalise on opportunities, it is important to know where you stand with the bank. Understanding your borrowing capacity, keeping your financials up to date, and maintaining realistic cash flow forecasts all help ensure you are prepared when opportunities arise.
It is also important to keep your broker and bank manager informed throughout the year. Updating them on seasonal conditions, financial performance, and any significant changes within the business helps ensure everyone understands your position and can move quickly when required.
We recently worked with a client who is excellent at keeping both us and the bank updated on how their season is progressing. When a parcel of leased land unexpectedly came up for sale, they were able to have a quick discussion with us and their bank manager and move forward with confidence. Because the groundwork had already been done, they were able to make an offer quickly, be first in, and secure the property.
Small decisions often become bigger decisions
What starts as a relatively small decision can quickly snowball into a much larger process if it is left too long.
A decision to increase an overdraft to support higher input costs may seem straightforward today. However, if that conversation is delayed until cash flow becomes tight, it can result in a rushed application, delayed input purchases, additional stress, or even the need to rely on short term finance facilities that come at a much higher cost.
Succession planning is another example we see regularly. While delaying succession decisions is not always intentional, and often involves factors outside the family’s control, it can create significant challenges later on.
Succession discussions are difficult at the best of times, but they often become much harder when retirement, illness, or unexpected life events force the issue. Time and time again, we see clients navigating stressful refinancing processes because succession decisions were delayed and now need to be completed under pressure, often during what is already a very emotional and significant period for the family.
Quite often, major decisions are really a series of smaller decisions made over time. The choices made at each step can have a significant impact on the final outcome. By delaying those smaller decisions, you can unintentionally create bigger problems for the future. Taking action early helps keep your options open and prevents everything from piling up at once.
Relying on other people
Another hidden cost of delaying financial decisions is that you often end up relying on other people to provide information at short notice. If you need updated financials from your accountant, a valuation report, legal documents, or bank approvals, waiting until something becomes urgent can add another layer of stress.
The reality is that your accountant, valuer, solicitor, and banker are all working with multiple clients and competing deadlines. They cannot always drop everything to assist immediately.
If you begin the process early and your accountant is on leave, or the valuation report takes an extra few weeks to complete, it is usually not a major issue because you have allowed enough time. However, if those same delays occur when a matter has become urgent, they can quickly become frustrating and stressful.
Starting the process early gives everyone involved the time they need to do their job properly and helps avoid unnecessary pressure.
Planning creates options
One of the reasons people delay financial reviews is the belief that a review automatically means change. A review does not mean change, and this is something we focus on heavily with our clients. We would never encourage someone to change banks unless we genuinely believed it was the right decision for their business.
In many cases, the greatest value comes from simply understanding the options available. Is there another lender that may better support your future expansion plans? Is your current interest rate still competitive? Would your existing bank sharpen their pencil if presented with alternative offers? At what price would purchasing leased land make sense for your business?
Completing a review allows you to identify opportunities to improve your lending structure, reduce costs, or increase flexibility for the future. In some cases, the outcome is simply the confidence of knowing your current arrangements remain the best fit.
We are currently working with a client who wanted to review their banking arrangements, despite being reasonably happy with their current lender. Nothing was necessarily wrong with their existing facilities, but they had future expansion plans they wanted to work towards.
While alternative lenders were able to offer some interest savings, we also presented the business back to their existing bank along with details of their future plans. When we weighed up the interest savings against the value of remaining with their current bank, the outcome became clearer. By understanding all of their options, they were able to make an informed decision that suited both their current situation and their long term goals.
You’re not alone
Most farmers wouldn’t make major cropping decisions without speaking to their agronomist, and many rely on livestock agents to help guide marketing decisions.
So why make important finance decisions without support?
Having someone in your corner who understands your business, your goals, and your financial position can help take much of the stress out of decision making. Regular conversations throughout the year allow us to understand the smaller changes happening within your business and identify opportunities or challenges before they become urgent.
Our role is not to force change. It is to help ensure decisions are being made when it is smart to do so, rather than when circumstances force your hand.
Looking ahead
Every farmer will face important decisions throughout their time in business. Some will involve growth, some succession, some investment, and others risk management.
You will not always get every decision right, and that is simply part of running a business. However, delaying decisions can often be more costly than making them.
By making an informed decision today, you can be confident that you have acted on the best information available at that point in time. Waiting for perfect certainty often means opportunities are missed, options become more limited, and unnecessary stress builds along the way.
Sometimes the greatest cost is not making the wrong decision. It is waiting too long to make one at all.