Put another way – it is protection from any risks that could have a significant detrimental effect on the continuity of your business.

The key is to think about the various things that could go wrong that could seriously hinder or curtail the operations of your business. Anyone who has put together a risk assessment will know that the more you think about things, the more risks you see, so I would suggest starting at a higher level under the headings of:

• Financial risk
• Key personnel risk
• Sustainability risk

Financial risk

Financial risk can be mitigated by looking at ways to protect your income.

Some change is out of your control – the most obvious over recent years being the reduction in Basic Payments.

The need to replace this income is key to the survival of many smaller farms. The Sustainable Farming Incentive is one way of replacing some of that income and of course the Countrywide Stewardship Schemes continue. It is possible to be both in SFI and Countryside Stewardship at the same time, but where there is an overlap, you won’t get paid for the same action twice. Recently, much more information has been shared regarding SFI, so it is certainly worth exploring these. I have heard many farmers say they are already complying with many of the conditions, so it is more a case of formalising the arrangements to ensure you are getting paid for your efforts.

We are seeing more and more farmers being approached to provide land for bio-diversity units and nutrient credits and this can be good, reliable income. I know some have been wary of the tax affects of these types of contracts, but the government has issued more guidance, which Neil Spicer picks up in his article .

There are many other methods of diversification – from the more traditional farm shop and renting of buildings for offices or storage to using land for camping, caravan storage or carparking and income from renewable energy.

Checking the viability of any diversification is key to knowing whether doing so will be beneficial and help your business move forward, or whether it is going to add another level of financial and other risks to the business.

In previous articles we have mentioned that it is key to consider all the one-off costs in getting set up together with the on-going expenses, to ensure that the expected income make the efforts of a project worthwhile.

Sitting alongside the key financial risks are the compliance risks, so make sure you have the right planning permissions before diving in too deep as it could prove costly to deal with issues retrospectively. Obviously, there are always health and safety issues associated with, for example, having additional people on your land, so be sure to have the right insurances in place.

From an accountant’s point of view, we would also advise on checking what are the potential tax consequences. Once you understand what the potential tax implications are of any actions then consideration can be given as to any ways to mitigate these, which may include operating under a different structure. Incorporation, as an example, may have the advantage of not just limiting your liability from any claims, but also protecting your well-earned assets from unnecessary tax.

Before leaving the subject of diversification, I must also just remind you to consider the VAT implications ahead of starting a new project. Don’t forget to treat the income and expenditure correctly and consider the need for partial exemption calculations on preparing each return as well as revisiting for the annual adjustment.

Personnel risk

At our Annual Farming Families seminar I asked: “How many of you are the only one within your business who knows how to do a particular task?

How many of you are the only one qualified or have the right tickets to perform a task?

What happens if you are incapacitated at the vital time that needs to be done?”

The key here is to think about who needs to know what. If you always just do something, it may well be that other people don’t even know it needs to be done.

It is really important to involve those around you in the different aspects of the business.

• Ensure they know who the key suppliers and customers are.
• Ensure they know who all your utility and service providers are.
• Ensure they know who all your advisers are.

In auditor’s speak, I would say document your systems. Not just the financial but think about all the operational aspects of your business.

Set out what the tasks are – who does what and, ideally, how. Ensure someone knows what to do if the key person cannot do a task – who else knows? Who else could help? Include contact details.

Essentially, set out a recovery plan for when the key person isn’t there to show you how to continue.

Put this document in a safe place – and unlike me, remember where your safe place is! Equally, it goes without saying, but I’ll say it anyway, that you shouldn’t be the only one who knows where it is.

This links quite nicely to succession planning.

If you want the business to continue, it is really important that you plan ahead for when you are no longer part of the business. Deciding on whether the business is to continue would be a good starting point, but assuming it is to continue who will be involved and how.

Ensure that if you are planning for others to be involved, that they want to be involved in the way you think and, just because they work in the business now, do not assume that they want to run it when you are not there.

In addition to going through all the practical things that keep the business running, think about how your plans for succession are documented and whether the legal documents allow your wishes to be followed. One thing to emphasise is that it is particularly important that your will doesn’t contradict your partnership agreement.

Sustainability risk

Sustainability risk covers a whole variety of issues from sustainability of the soil, the land etc., to being able to keep up with changes in technology and regulation.

Notwithstanding your own thoughts about various regulations arounds sprays, waste disposal etc., it is obviously really important that you don’t fall foul of any non-compliance of such regulations. A claim for damages as a result of pollution etc., could come with a significant financial burden as well as reputational harm.

Sustainability also means keeping up with change, where it is necessary to do so, to keep your business both compliant and efficient.

Technology in the field (literally) is constantly moving. Knowing how to use the new technology properly is key for you to really benefit from it and seeking expert advice from the right people is crucial for you to obtain the most benefit.

It is no different with the technology in your office; knowing how to use your accounting software will ensure you stay financially compliant.

In conclusion, there is a lot to consider when thinking about future-proofing your business and with it being such a big topic, it is easy to see why it can feel overwhelming. My recommendation is that you talk to people around you, break things down into small steps – think about the most important ones and seek help from the right people to help you to do the right things. It’s worth remembering that we, at Rickard Luckin, aren’t just involved in finance but have experience in running businesses and helping others to do the same.

This article is from the latest edition of our Agricultural Briefing. To receive future copies of any of our newsletters directly to your inbox, please  visit our preference centre   to register your interest.