An article written by QFF Corporate Partner BDO
Like many other sectors, the food and agribusiness sector feels the pressure of rising costs and competition for talent, meaning every dollar counts. Having a thorough understanding of your current business position is crucial to your success. Don’t wait until you’re in the thick of a financial crisis to evaluate your current `state of play’.
Agribusinesses must be proactive with their budgeting, cashflows and forecasting and have strategic business plans in place to ensure financial resilience, so that if challenging situations occur, they’re well prepared. Not only will this reduce both business and personal stress, but will ensure the business can meet financial obligations and continue to grow.
Australia’s food and agribusiness sector plays a vital role in the nation’s economy, and throughout this article, our specialist advisers provide you with valuable business insights and recommendations for achieving success.
Be proactive with budgeting, cash flows and forecasting
No matter the size of your agribusiness, budgeting, cashflows and forecasting areessentialto help you succeed long-term. Whether your agribusiness is in a period of growth, transition or maintenance, budgeting, cashflows and forecasting can help map out the path to achieving your financial business goals.
In the food and agribusiness sector, where variables like weather patterns and commodity prices have a significant impact, being proactive in budgeting, cashflows and forecasting is crucial. Regularly review and update your budgets, considering factors such as production costs, market trends, and any regulatory changes is important to the business’ success. Thinking more strategically about your budgeting, cashflows and forecasting allows you to make informed decisions and adapt accordingly to ensure the business continues to succeed.
Recommendations to achieve success
- Regularly review and update your budgets and cashflows to reflect changing market conditions, production costs, and revenue projections.
- Incorporate historical data, industry trends, and market research to improve the accuracy of your forecasts.
- Seek input from key stakeholders and industry experts to gain different perspectives and ensure comprehensive planning.
- Consider using budgeting and forecasting software to streamline the process and improve accuracy.
- Capital expenditure budgets are as important as operational budgets.
Strategic planning
Strategic planning is the foundation of a successful business. In the food and agribusiness sector, it is essential to consider long-term goals, market dynamics, and emerging trends. Conduct a thorough analysis of your business strengths, weaknesses, opportunities, and threats (SWOT analysis). Identify your target market, understand consumer preferences, and watch emerging technologies and industry innovations. Develop a comprehensive strategic plan that aligns with your vision and goals, enabling you to make informed decisions and stay competitive.
Best practice strategic planning is a highly valuable process, regardless of if your business is performing well or if you are exiting the market – setting a clear direction, remaining true to your goals, and re-assessing your plan will provide the best chance of success.
Recommendations to achieve success
- Conduct a thorough SWOT analysis to identify your business’s strengths, weaknesses, opportunities, and threats
- Clearly define your long-term vision and goals and align your strategies accordingly
- Stay informed about consumer trends, emerging technologies, and market dynamics to adapt your strategies effectively
- Develop contingency plans to address potential risks and uncertainties, such as climate variability, market fluctuations, and regulatory changes
- Review the strategic plan annually to ensure the plan continues to reflect the long term vision and goals for the business.
Ensure financial resilience
Building financial resilience is crucial in an industry prone to fluctuations and uncertainties. Maintain a robust financial management system that allows you to monitor cash flow, manage debt effectively, and make informed investment decisions. Diversify your income streams by exploring value-added products, export opportunities, or partnerships with complementary businesses. Additionally, consider risk management strategies such as insurance coverage and hedging to mitigate potential financial risks.
Recommendations to achieve success
- Maintain a strong cash flow management system, including monitoring inflows and outflows, and maintaining sufficient working capital
- Diversify your revenue streams by exploring value-added products, export markets, and partnerships with complementary businesses
- Continuously assess and optimise your cost structure, including production costs, supply chain management, and operational efficiencies
- Consider risk management strategies, such as insurance coverage and hedging, to mitigate potential financial risks
- Consider the relationship with your bank and ensure they understand your business.
Tax planning
Tax planning is a critical aspect of any business strategy. Understand the tax implications that can significantly impact your profitability in Australia’s food and agribusiness sector. Stay updated with relevant tax laws, incentives, and exemptions applicable to the industry.
Engage professional tax advisers with specific knowledge in agribusiness to ensure you are maximising available deductions, claiming eligible grants, and structuring your business efficiently. Effective tax planning can help reduce costs and improve your bottom line.
Recommendations to achieve success
- Engage a professional tax adviser with expertise in agribusiness to ensure compliance with relevant tax laws and identify eligible deductions and incentives
- Stay updated on changes in tax regulations, grants, and exemptions specific to the food and agribusiness sector
- Implement effective record-keeping practices to track and document eligible expenses and deductions accurately
- Explore opportunities to structure your business tax-efficiently, such as utilising appropriate legal entities and taking advantage of available tax concessions
- Consider conducting annual tax planning towards the end of the financial year to minimise the tax implications for the year.
Ensuring success
Success in Australia’s food and agribusiness sector requires proactive financial management, strategic planning, financial resilience, and effective tax planning. By adopting these strategies and implementing the recommended actions, businesses within the sector can navigate challenges, capitalise on emerging opportunities, and achieve long-term success.
BDO can help
We take a holistic approach to understanding the unique situations of those within the food and agribusiness sector. Contact your local food and agribusiness adviser for tailored support.