MMN November 2023 – The Power of Benchmarking

The importance of understanding the financial data within your business was one of the sessions at a recent dairy conference “Challenging the Norm: Future Dairy Systems”, held by SAC Consulting and funded by the Universities Innovation Fund. Dairy farmer and past First Milk director, Jim Baird spoke about how he has seen first-hand the positive impact that being part of a benchmarking group has had on his own and other farm businesses.

Understanding your own figures

“If you don’t measure it you can’t change it”.  Understanding the financial health of your own business is extremely important if you are to withstand the volatility of the dairy market. Having a good grasp of the costs associated with your business allows you to react to and understand how fluctuating milk and input prices will affect your bottom line.

When the market is buoyant, you will be able to see what surplus is available for investment, and when prices are poor or inputs are high you can identify where costs can be controlled.

It may seem like there is already a never-ending amount of paperwork to tackle on farms and adding to it by collating financial and physical performance information in a way that allows benchmarking can seem like another job which there is no time for.  However, the level of digitisation on modern dairy farms now means that without too much extra work you should be able to make the information easily available to access.

Parlour and herd management software will give all the physical information required regarding fertility, health, cow performance – providing accurate information is added to the system. In terms of health recording, one of the most important pieces of information you can record is the reason why cows leave the herd, either as culls or casualties.  This is powerful information which can be reviewed at the end of the year to identify the main causes of cow losses – this can guide a discussion with your vet and farm team to determine if there is one particular area where changes can be made to improve cow health and increase herd longevity.

As we have moved to cloud-based accounting and VAT submission this gives a great opportunity to create valuable benchmarking information while completing the VAT return. Spending a little extra time recording the tonnage of feed delivered and whether it was for cows or youngstock, recording medicine use accurately, and allocating sundry costs to more specific accounts will then allow the information to be easily drawn off to populate some benchmarks too.

Benchmarking with others

Sometimes the most important benchmarking you do is against yourself year-on-year. However, there are many benefits to being part of a group, sharing information and picking up best practice and ideas from fellow farmers. It can be a daunting prospect to share financial information with your peers and it is important that there is trust amongst the group that information will be treated confidentially. No rent and finance information should be shared.  Comparing data sparks conversations and allows the sharing of best practice and top tips to control costs and drive income. AHDB published a report a few years ago which looked at the attributes of the most successful faming businesses and one of those was benchmarking and reviewing that information as part of a group.

Preparing for change the characteristics of top performing farms-1.pdf (windows.net)

Alison Clark, alison.clark@sac.co.uk; 01776 702649