Industry sector:

Organic farm: Payments to creditors


When you buy supplies of goods and services on account instead of paying cash there and then, your suppliers are your creditors until you pay them. Enter in your cash flow forecast the payments that you will make to your creditors (including VAT) in the months in which you will pay them. Depending on the nature of your farm, you will look to set up accounts with:

  • agricultural merchants
  • feed merchants
  • seed merchants
  • livestock breeders
  • abattoirs
  • manufacturers and distributors of machinery, buildings and equipment
  • veterinary practices

The regulations governing organic farming in the UK only allow specified products to be used so you'll need to make sure that the products you use on the farm, such as fertilisers, meet the regulations. There are also regulations governing where you source your livestock from.

Setting up an account

To set up an account you may be asked to provide bank and trade references and until the account facility has been granted you will have to pay for your order at the time you place it. This is known as paying on a pro forma basis.

Once your account has been set up you will be invoiced at monthly or fortnightly intervals, and expected to pay within a certain number of days of receiving the invoice. (You may be able to negotiate a longer than average credit period - this will depend on the individual supplier.)

Discounts

You may be able to negotiate various discounts from your suppliers for:

  • paying your bill cash on delivery, within a specified period, or paying by direct debit
  • buying supplies in large quantities

However, think carefully about these - you might prefer to pay a little more for your goods and have a longer credit period so that you have the chance to make some money from selling your produce before you pay your suppliers.