Clint Emslie, Financial Consultant
As many of you may already know we welcomed Kellie Scott to our Pinion Finance team three months ago. Kellie’s background is commercial/retail banking, and she has also worked in the finance broking space for several years – Kellie has hit the ground running and is adding tremendous value to our service proposition. Kellie’s role will be primarily office based, taking care of the forever spinning administration cogs of our business. She will periodically be outbound at which time I hope you get to meet her.
Welcome Kellie!
It’s that time of the year, where the Christmas holidays are a bygone memory, and we are finalising our seasonal plans. This year comes with a significant difference, one that we haven’t had to deal with for some time, we are coming off one of the driest years in history. We are optimistically holding out hope for a season break over the next couple of months. Coming off a dry year means that the carry over cash is most likely less than usual and, therefore, working capital requirements for 2025 season need to be carefully considered and pro-actively formalised.
The working capital component of any business is the life blood, with insufficient seasonal facilities threatening the continued existence of the entire business. We are currently working through this season’s plans with our clients across Victoria, Tasmania and South Australia and aim to have facilities secured by end of April. If your business is not feeling secure or these conversations are proving a challenge, I urge you to get in touch with Pinion Finance to assist.
With a lower than usual starting cash balance, preservation of cash this season is paramount. As alluded to in my previous InTouch article, this season is one of prioritisation of projects, repairs, cost management and fleet replacements, all while ensuring business risk is not increased. Pro-actively managing the interest cost is about performing periodic debt reviews and benchmarking your current business finance and banking relationship against the market. Furthermore, it’s avoiding expensive lines of credit (seasonal facilities or short-term credit) offered by your local farm input supplier or agency. Yes, the convenience is attractive, but this can amount to thousands of dollars of extra interest payable by end of season.
Poorly managed cost structures are well disguised in good years (like we have had for the last 4/5 years), but in a year like 2024 (and into 2025) these become very apparent. In working with some of my clients around business finance structures, it’s evident that matching of assets and liabilities is not always considered. If the term of the liability (loan) is significantly shorter than the effective life of the asset it can place the business cash flow under stress during leaner times, like the current environment. It is important to also manage working capital increase structures in a way that is cost effective to the business and minimises exorbitant holding costs (e.g. line fees). Remember that a working capital/overdraft facility should comfortably move between a debit and credit position through the season.
Our door is always open for an exploratory discussion.