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While all farmer creditors are anxious to settle bills at this time of the year, with payments coming in, contractors are surely the most exposed.
Dairy farmers are frequently the biggest and typically best-paying customers of contractors – but this year things are not so rosy. The continuing woes in the tillage sector are also having an impact. Meanwhile, in the west of Ireland, the horrific weather and the effects of Brexit on the beef sector – the predominant enterprise – have combined to cripple farmers.
Contractors feel they are not a priority for many farmers when it comes to payment, even though their service is critical
A comment at a dairy farm walk earlier this year that “farmers should pay their contractor last – he’ll wait for it” in particular caused anger in the sector. Contractors feel they are not a priority for many farmers when it comes to payment, even though their service is critical, both in terms of its timing and its quality.
A spokesman for the Farm Contractors of Ireland described the situation as being “critical”, with casualties almost inevitable.
“The work pressure in our business is always there, with every farmer wanting their work done on the same day,” he said. “Bad weather left work windows very tight this year. That is dwarfed by the financial pressure, and the mental pressure that creates”.
As another contractor put it, “I owe a fortune, and I’m owed a fortune.” The suggestion of a payment plan, to clear bills over the year, is one many contractors are making to their customers.
Advice
With BPS money landing this week, the Irish Farmers Journal asked Declan McEvoy of IFAC about how farmers need to consider addressing any outstanding debt.
“First and foremost, farmers should step back and take a deep breath before considering repaying any serious bills.”
Revenue will be top of the list to be paid for most farm businesses given the time of year and if farmers don’t pay preliminary tax then they are charged at an interest rate of 8% to 9%, so it is an expensive form of credit. Farmers should then consider where else they are paying for expensive credit. Every business needs to maximise cheap working capital finance rather than preferential expensive market credit.
The other key point is that there might be very little output sales for the next number of months until next spring, so farmers need to sit down and budget what costs will be incurred during that period and plan ahead.”
Advance payments ease debt pressure
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