POINT OF VIEW OF STOCK FIRM

Press, Volume CVI, Issue 31209, 5 November 1966, Page 9

POINT OF VIEW OF STOCK FIRM

The stock firm view on some aspects of farm development were given by Mr B. de C. Thomson, manager of Dalgety and New Zealand Loan Ltd., In Christchurch, when he spoke at the businessmen’s seminar held by the North Canterbury Agricultural Advisory Committee last week.

“We consider it absolutely essential that a farmer contemplating a development scheme should discuss his plans and the financial means of implementing them with his stock firm before committing himself,” Mr Thomson said.

“We have noticed a tenency to plan very fully the physical means of increased production from pastures and forage crops without sufficient thought or detailed planning being given to the provision of additional capital stock, whether by purchase or the farmer’s own breeding. A farmer’s overdraft may be so high that finance for the purchase of additional capital stock on a short term basis may not be possible, and in such cases an endeavour to provide for this should be made in any application for a State Advance development loan.

There has been a tendency to regard the livestock side as the stock firm’s sole prerogative and to use the whole of the loan money for other improvements. “To develop out of tax paid surplus is a very slow business, but this is not to say that it cannot be done —it has, and by some very efficient and solid fanners — but to carry out what really are crash programmes from revenue without provision of long-term capital can only have one result, as shown by the

increase in farmers’ indebtedness to stock companies of £3O million over the last three years to a total of about £6O million in April this year. “Budgetary planning is essential and equally so are frequent progress reports to the farmer throughout the year comparing the actual income and expenditure with the budget forecast. In addition, a frequent summary of

the cash flow is vital information to the farmer. Both these could assist the accountant in making a more accurate estimate of the coming year’s working and perhaps help to avoid some of the more violent fluctuations in provisional tax instalments, particularly where the tax has been over-estimated.” Mr Thomson said that they could be in the position of never being sure whether there would be a refund or a “plaster out of the blue.” Stock and station agents, he said, would be recommending to the taxation committee that pay-as-you-earn should be abandoned as far as farmers were concerned.

It IS nigniy uraiiduic that the closest liaison should exist between accountant and stock firm. Accountants with their complete and thorough knowledge of present tax incentives and the deduction and spreading of expenditure items under development schemes can be of immense assistance to the farmer. “Permanent capital improvements should be financed by long-term finance, leaving the stock firm to find the fixed charges in serving loans, rates, taxes, etc., working expenses, replacement stock, personal and living expenses and the inevitable replacement of motor-cars and plant,” said Mr Thomson.