DAIRYFARMERS should utilise the information they collect when tallying up their books to understand how every on-farm decision is impacting their bottomline, according to newly appointed Dairy Australia Farm Business Management program manager Neil Lane.
Mr Lane was speaking at the recent Dairy SA Dairy Innovation Day in Mount Gambier.
"People say to me 'Neil, it is not all about the money' and yes, there are lots of other things in life but profitable businesses create opportunities," he said.
"Everyone's business is different but what we need to do is get them thinking about their individual situation and recognise their strengths and weaknesses."
Mr Lane said business confidence was linked to global milk prices which while remaining cyclical appear to have become more volatile.
"As an industry we really should be focused on maximising margins according to the prevailing milk price, feed costs and seasonal conditions. We also need to keep one eye on our balance sheet and a longer term view on wealth creation," he said.
His role will include driving consistency in financial terminology, in how farmers describe and calculate profit, cost of production and risk parameters.
He said a major tool in boosting financial management would be DairyBase, which he said would provide the Australian dairy industry with a "world class" industry database and benchmarking service.
About 75 sets of data on feed costs, labour costs, capital costs, debt repayments are collected each year by Vic dairyfarms through the Victorian DEPI's Dairy Farm Monitor Project but with the advent of DairyBase, this will expand to 300 sets of data from across Australia. In time DairyBase will also be available to service providers and individual farmers.
It will be run in parallel with Dairy NZ, which also has an extensive database, and enable producers to compare their business with others of a similar size and rainfall measurements.
Mr Lane said farmers already collected a lot of financial information for tax compliance reasons and this could be used for other purposes such as budget versus actual cash flow monitoring, and more detailed analysis of operating expenses, feed costs and capital costs.
Taking Stock, which was in the final stages of an upgrade, will continue to be used as a first look at farm business performance but they would also incorporate the Dairy Farm Monitor Project into some discussion groups.
"Those producing off grass generally have lower variable costs but also lower milk prices as they tend to produce milk to a more seasonal pattern. But then there is a trade-off between efficient use of capital and rising cost of production, with more intense feeding systems," Mr Lane said.
"The challenge is what we can do to improve."
* Full report in Stock Journal, July 3, 2014 issue.