Agribusiness Diploma gives farmers a good understanding of financial analysis

Having a good understanding around the financial analysis process helps remove a lot of stress for farmers. Photo / Getty Images

It's often about wealth creation over the medium to long term.

The best financial decisions are rational — not emotional — ones.

But the head of Rural and Commercial Banking at SBS, Grant Dermody, says it's all too easy for agribusiness owners to get caught up in the emotional side of investment decisions if they don't have a solid understanding of their own financial picture.

"When you've been looking at a neighbouring piece of land and dreaming about what you might do with it and how it could benefit your business ... and then real estate agents are creating tension between three or four parties and you feel that pressure of not wanting to miss out, it can very easily become an emotional decision."

The key, Grant says, is knowing your numbers and understanding what they mean.

Cash-flows, balance sheets, operating expenses, opportunity cost and the internal rate of return are all important financial terms. But many farmers have to rely on external consultants to interpret their impact and successfully navigate a path forward.

Undertaking a qualification such as Primary ITO's Diploma in Agribusiness is one way of upskilling yourself so you can make more informed financial and investment decisions.
"People who have done the diploma understand those metrics and the importance of them," Grant says.

"There are plenty of astute farmers out there but a lot of them would benefit from having a good understanding around the financial analysis process that would enable them to be more objective.

A Diploma in Agribusiness provides this understanding. They're able to analyse opportunities and understand those return factors and what impact a particular investment would have on the performance of their business."

Grant says farming is often a long-term inter-generational business so making the right financial decisions has a long-lasting impact.

"It's often about wealth creation over the medium to long term. How is your business performing today, and what are the financial metrics required to reach your goals?

"A qualification such as the Agribusiness Diploma brings a clearer lens to the decision-making process and leads to a very informed discussion between farmers and their rural bankers."

Sound financial knowledge and being able to understand the technical terms also makes those conversations with your banking adviser a lot easier and more enjoyable.

"It certainly speeds the process up if they've already done a robust analysis and it gives the bank confidence that the business owners understand that growth opportunity and how it will impact on the balance sheet and the cashflow of their business."

Grant says knowing your financial position is very empowering.

"Working through an analysis process also gives you more clarity. You could uncover some additional benefits you weren't initially aware of."

It can also help ease worries and tension between multiple stakeholders or family members.

"Knowing the numbers is the key thing. Not knowing can lead to a lot of pressure, frustration and stress — and that's true with anything, not just the financial side of your business.

"Undertaking extra study to upskill yourself in this area can remove some of the emotion out of major decisions and help rationalise things. I would certainly recommend it."