Description of terms
These descriptions will give you a better understanding of what is included
under each item for those figures taken from the FBS (Farm Business Survey) and
displayed by the program.
Total farmed area
This is the area that is farmed by the business, including land hired in for
less than one year and land farmed under a contract farming agreement for
another party and land that you farm under a share farming agreement with
another party. It does not include: farm buildings, woodland, all farmland let out by your
business (even if let out for less than one year) and land that is farmed under
a contract farming agreement by another party.
"Total area of farm" - used only the Balance Sheets pages
- is a different measure and includes, in addition to the above, woodlands,
buildings, gardens, roads, water and other areas not used for agriculture.
Total area of farm is typically the area that is quoted when a farm is bought
or sold (where no land is rented in or farmed on contract).
Sales
Livestock sales plus crop sales plus total financial output from miscellaneous
activities (see list below) provided these activities are integrated into the
farm business:
1. Processing and retailing of farm produce
2. Agri-environment type payments, e.g. management agreements, agri-environment
scheme payments (e.g. ESA, Countryside Stewardship),
3 Any other miscellaneous subsidies.
4. Any rents received on farm house, cottages and buildings .
5. Recreation, tourist accommodation and catering, rural crafts.
6. Revenue from hiring out machinery or labour.
7. Any other miscellaneous receipts.
Subsidies
Livestock subsidies plus crop subsidies plus single farm payment.
Cost of sales
Opening valuation plus purchases less closing valuation.
Opening valuation
Opening value of crops, by products and fodder in store plus opening value of
feedstuffs, agrochemicals, fertiliser, and vet and med materials plus opening
value of livestock.
Purchases
Purchases of livestock, crops, by products, fodder (including keep for less than
one year and agistment or away wintering), feedstuffs, agrochemicals,
fertiliser, vet and med expenses, livestock purchases.
Closing valuation
Closing value of crops, by products and fodder in store plus closing value of
feedstuffs, agrochemicals, fertiliser, and vet and med materials plus closing
value of livestock.
Gross profit
Sales and subsidies less cost of sales
Fixed costs or overheads
These are described below. Use these descriptions as a guide to what each cost
item covers when the FBS results are displayed.
Wages and salaries
(This includes casual as well as regular labour and also includes the farm
manager)
It includes:
a) The cash payment made to the worker including overtime plus premia, bonuses
and the employer's and employee's shares of social security contributions and
employer's common law liability insurance.
b) The cost of perks such as payment of council tax, cottages or board, milk,
potatoes etc, which are provided for farm workers and their families, whether
they form part of the contract wage or not.
Machinery repairs
These are the cost of repairs and servicing (including replacement parts) to
implements, machines, vehicles and equipment (including farm cars, electric
motors, petrol engines, tools with a value over £200 at purchase, coolers, bulk
tanks, tenant-type poultry houses and incubators, spray lines, cold frames and
glass cloches). The costs are net of any insurance receipts. It also includes
small tools, tyres etc.
Machinery fuel and oil
Petrol, diesel oil, paraffin, lubricating oils and greases.
Contract work
Total expenditure on work carried out by agricultural contractors. Cost of
materials is also included here, unless it can be estimated reasonably
accurately (in which case it is recorded separately under crop protection,
fertiliser or other crop costs). Contract labour is only included under this
heading when associated with the hiring of a machine. Otherwise contract labour
is included under "casual labour".
Other machinery and motor expenses
Equals machinery rental (i.e. cost of hiring machines driven or used by the
farm's labour, and machinery under contract hire or similar rental agreements)
plus vehicle tax.
Rent
The actual rent paid less any allowances given by the landlord by way of
reduction of rent. Where rent is paid partly by transfer of farm produce or
services, the value of the farm produce or services should be included in rent
and as a contra item in sales and subsidies above. Rent includes any charges
the landlord makes on new equipment, new buildings or improvements before these
charges are incorporated in the normal rent for the farm. Any sum paid by the
tenant but normally the responsibility of the landlord, e.g. fire insurance
premia for farm buildings, is also included in rent. Rent paid for land under
an agreement for less than one year is also included, (eg grass keep rented for
less than one year and other 364 day agreements).
Rates
Includes:
-
Council tax payments paid by the farm business, eg in respect of cottages let to
farm workers. Does not include personal council tax payments, eg as paid by the
farmer or members of the farmer's family, as they are private expenditure.
-
Uniform Business Rate of an activity - if the income from that activity is
included in Farm Income (eg a farm shop or a caravan site).
-
Rates to local councils or water authorities for regional drainage schemes or
effluent disposal.
Power, electricity and heat
Includes:
All electricity used in the farm business including that used for heating
glasshouses, drying cereals etc.
All the heating fuels (except electricity) for all farm purposes, including the
fuel used for heating glasshouses, drying cereals etc.
Property repairs
This includes the cost of repairs to tenant type items such as hedges, fences
(including fencing wire), ditches, gates etc. and the estimated cost of all
landlord type repairs, including the cost of major structural repairs to
buildings (e.g. the re-instatement of roofs and walls).
Labour costs should only be included if the labour is provided by non-farm
labour.
The cost of repairs carried out by the landlord on tenanted property is not
included.
Professional fees
These include:
-
Safe custody fees
-
Accountants/auditors fees
-
Valuation fees
-
VAT recording and secretarial charges (including travelling secretaries)
-
Legal fees (relating to business activities)
-
Land agent fees (relating to business activities)
-
Advisory and consultancy fees (if not specifically allocated to crop or
livestock costs).
Bank interest and charges
Interest
Interest on bank overdrafts, hire purchase, leasing agreements, merchants' and
other trade credit and interest on bank loans, loans from AMC, building
societies, insurance companies, and similar institutions, and loans from
private sources and from the family.
Bank charges
Include:
-
Bank commission on current account (but not interest)
-
Management fees relating to loan accounts
-
Overdraft charges
Insurance costs (excluding labour)
Insurance premia covering farm risks, such as the holder's third-party
liability, vehicle insurance, fire, flood, insurance against death of livestock
and damage to crops etc, hail and fire insurance of buildings, premises,
glasshouses and frames on an owner-occupied farm and for any buildings owned by
a tenant on a tenanted farm. Excludes: premia covering accidents at work and
private insurances of the farmer and family.
Depreciation of machinery
In addition to general agricultural machinery and tractors, machinery
depreciation includes farm cars, electric motors, petrol engines, tools with a
value over £200 at purchase, coolers, bulk tanks, tenant-type poultry houses
and incubators, spray lines, cold frames and glass cloches.
With machinery depreciation, you have two options: you can either allow the
program to calculate deprecation for you to make sure the value is comparable
with machinery depreciation as recorded in the FBS. If you choose this approach
the program calculates the machinery depreciation charge for your business over
the last 12 months.
Alternatively you can enter the value for machinery depreciation direct from the
accounts for your business. If you do this, however, there is a strong
probability that the value in the accounts will not be on the same basis as the
FBS and will therefore not be comparable with the FBS. This is because
depreciation in the FBS is on the current replacement cost basis, whereas in
financial accounts it is often on an historic cost basis.
Calculate machinery depreciation
If you want the program to calculate machinery depreciation for you on the same
basis as the FBS you will need to click on 'Calc' (on top of the box in which
to enter your value). There are then two methods by which you can enter your
data:
Method 1
By entering values for each machine category.
Method 2
This is the most accurate method. Under this option you click on an underlined
machine category to display a form that enables you to enter values, machine by
machine. This method also allows for situations where machinery is shared with
other farmers or is used, in part, for private use, eg farm cars.
Method 1
This form lists five machinery categories and comprises of a set of boxes into
which you enter the following:
Opening value of machinery:
The market value of machinery at the opening valuation. This is the
market value at 12 months ago. For example, if you are using the program at 1st
June 2008,
it would be the market value of machinery at 1st June 2007. All
machinery that the business owned at that point in time should be entered,
including that under hire purchase, lease purchase/finance leasing agreements.
Market value is the value on the open market taking into account the age and
condition of the machine.
Machinery under contract hire or similar rental agreements should not be entered
here (see description of 'other machinery and motor expenses').
Purchases:
The purchase cost of any machinery purchased in the last 12 months is
entered in the second column.
Sales:
The sale value of any machinery sold is entered in the third column.
By clicking on the 'Total' button the total depreciation will then be
calculated.
Clicking the 'OK' button will then place this value into the box for machinery
depreciation on the comparative analysis page.
Clicking the 'Cancel' button ignores all entries and totals and closes the form.
Method 2
This form is similar to that in Method 1 except that you are now entering values
for individual items of machinery that fits the category. More significantly,
for each item of machinery you will also indicate the percentage used on
business to allow for situations where machinery is shared with other farmers
or is used, in part, for private use, eg farm cars.
As in Method 1 you will see a set of boxes into which you enter the following:
Opening value of machinery:
The market value of machinery at the opening valuation. This is the
market value* at 12 months ago. For example, if you are using the program at
1st June 2004, it would be the market value of machinery at 1st June 2003. All
machinery that the business owned at that point in time should be entered,
including that under hire purchase, lease purchase/finance leasing agreements.
Market value is the value on the open market taking into account the age and
condition of the machine.
Machinery under contract hire or similar rental agreements should not be entered
here (see description of 'other machinery and motor expenses').
Purchases:
The purchase cost of any machinery purchased in the last 12 months is
entered in the second column.
Sales:
The sale value of any machinery sold is entered in the third column.
Percentage used on business:
This is to allow for situations where machinery is shared with other
farmers or is used, in part, for private use, eg farm cars.
For each machine you will need to enter the 'percentage used on business'. This
will normally be '100%'. If the machine's ownership is shared with at least one
other business the percentage used on business is entered accordingly. For
example, if a machine is half owned by another farm business, then the share
would be 50%.
With Cars, utilities and commercial vehicles, the 'percentage used on business'
reflects the approximate share of the vehicles use that is for farm business.
For example, if the 'farm car' is used for the farm business 60% of the time,
and private use 40% of the time, then '60%' is selected.
By clicking the 'Enter more' button a total of the values you have entered,
according to the percentage used on business, will be displayed. Your entries
will then be cleared for you to continue with additional items.
Clicking the 'OK' button totals all the entries just like the 'Enter more'
button but then closes the form and places the totals into the respective
machinery category row for the form in Method 1.
Clicking the 'Cancel' button ignores all entries and totals and closes the form.
NB: Once the form has been closed or you click the 'Enter more' button, it will
not be possible to go back to the values you have entered.
Depreciation of buildings and works
This covers buildings, premises and land improvements, e.g. fencing, draining,
irrigation for buildings, premises and land improvements owned or paid for by
the occupier.
Depreciation of glasshouses
This covers glasshouses and walk-through polythene tunnels (including any
associated boilers and irrigation lines) which are owned or paid for by the
occupier.
Depreciation of permanent crops
These are crops with a life of not less than 5 years, such as orchards,
vineyards, hop gardens and hardy nursery stock stock-plants (i.e. hardy nursery
crops which stay in the ground and from which output is taken in the form of
cuttings, fruit etc). Hardy nursery stock with a production cycle of more than
5 years, where the mature plant is eventually sold, is not included here, nor
are strawberry plants and rhubarb (which have a life of less than five years.
Other overheads
Includes:
Water charges: covers cost of water for irrigation, drinking,
cleaning, cooling etc. on the farm, also includes all charges and licences
payable for connection to a water supply and for the abstraction of water for
irrigation where they relate to the farm business.
All other overheads: all taxes and other dues relating to the
farm business, subscriptions, advertising, telephone and postage stamps,
periodicals, pest clearance and shot-gun expenses (farm share), travel and
subsistence (farm share), stationery, sporting costs (if there are any sporting
rights), general chemicals, fines and compensation paid to a third party
arising from civil and criminal legal action relating to farming activities,
cost of hiring a building for less than one year for some other purpose than
for keeping crops or livestock.
The following are excluded from 'all other overheads':
-
Drainage rates payable to Local Authorities or River Boards (these are recorded
under 'rates')
-
Vehicle tax (this is recorded under 'other machinery and motor expense')
-
VAT
-
Taxes etc levied on labour such as Social Security contributions (these are
included in 'wages and salaries')
-
Personal taxes of the farmer (this is regarded as private expenditure)
-
Council Tax paid by the farmer (this is also regarded as private expenditure)
Total overheads
Total overhead costs
Tenant-type capital
Includes closing valuations for: machinery, livestock, glasshouses,
permanent crops, crops, forage, cultivations, stores, liquid assets,
and Single Payment Scheme entitlements
Single Payment Scheme entitlements
SPS entitlements - market valuation of all Single Payment entitlements,
for all categories (moorland, SDA, other) and payments (normal, set-aside,
and other). (To 2012 - discounted)
Liquid assets
Includes cash, deposits, short term loans, and monies owed
(debtors - including suspended debtors)
Net worth
Total assets less total external liabilities
Gearing ratio
Total liabilities as a percentage of net worth
Liquidity ratio
Current assets as a percentage of current liabilities. Also
known as the 'current ratio'. Current assets include
inventories (and are calculated in Balance Sheets).
Current liabilities include: hire, leasing, trade creditors,
bank overdraft, and other.
Return on tenants capital
Farm business income as a percentage of tenant-type capital
Return on total capital
Farm business income as a percentage of total assets
Labour costs per £100 turnover
Wages and Salaries per £100 Farm business turnover
Machinery costs per £100 turnover
Machinery costs (including: 'repairs'; 'fuel and oil'; and 'depreciation')
per £100 Farm business turnover
Farm business turnover
Total output from all crops and livestock enterprises plus
set-aside payments, Single Payments, and other income from
agriculture and related activities, plus income from
semi-integrated non-agricultural activities: [Sales + Subsidies]
Farm business income
Farm business turnover, less farm business costs, plus profits from sale of
farm business assets
Net profit
Gross profit less total overheads
Profit before rent, interest and bank charges
Net profit plus rent plus interest and bank charges
Compare with FBS
For 'All Performers' the FBS data displayed for comparison with your data will
be average results for the entire FBS sample. If you select 'High Performers'
the FBS data displayed will be for farm businesses which came within the top
25% in terms of ratio of total output to total input.
Once you have chosen which category you want the comparison to be based on, i.e.
'all performers' or where there are enough farms in the sample, 'high
performers', the program will compare your results with the FBS and it will
describe how your figures compare with the FBS results by using one of five
terms; 'low', 'low to average', 'average',
'high to average' and 'high'. It will do this
for each of the items for which you enter data.
What do these terms mean? Lets look at a couple of examples. With 'sales and
subsidies' for example, a 'low' comment means that the level of sales and
subsidies in your accounts falls within the range shown by the 20% of farms in
the FBS with the lowest level of sales and subsidies. If your score was 'low to
average', the level of 'sales and subsidies' in your accounts falls within the
range shown by 20% of farms with the next highest sales and subsidies. If
'average', your sales and subsidies figure falls within the range shown by the
next 20% and so on up to the 'high' group which is the final 20% of farms with
the highest sales and subsidies.
Similarly with costs, in the case of 'contract work' for example, a 'low'
comment means that the level of contract costs in your accounts falls within
the range shown by the 20% of farms in the FBS with the lowest level of
contract costs. If your score was 'low to average', the level of contract costs
in your accounts falls within the range shown by 20% of farms with the next
highest contract costs. If 'average', your contract costs figure falls within
the range shown by the next 20% and so on up to the 'high' group which is the
final 20% of farms with the highest level of contract costs.
Remember, if you are doing the comparison on the basis of 'high performers', the
comments will describe how your figures compare with those from the 'high
performers' sample, i.e. farm businesses which came within the top 25% in terms
of ratio of total output to total input. .
All the figures that the program displays are important, including 'net
profit', but the most important one is the 'profit before rent, interest and
bank charges'. This figure will provide a more meaningful comparison with the
FBS results because it is before rent, interest and bank charges are deducted
and thereby enables your results to be compared on a 'level playing field' with
farms in the FBS, regardless of whether they are tenanted or owner occupied.
