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It’s e-profit monitor (ePM) season. The exercise represents the first step for turning an average beef enterprise into an efficient, profitable one. Mathew Halpin has an excellent guide to completing one in last week's Irish Farmers Journal.
However, one of the sticking points when filling out the details for an ePM are the fixed costs. Here we outline a guide to calculating fixed costs.
This includes cash paid to employee, tax and PRSI paid on behalf of employee and employer's public liability insurance. Include the cost of permanent labour, part-time and casual labour and monies paid to Farm Relief Service (apart from that paid for hoof-paring which should be allocated to "veterinary and AI" in "variable costs").
Divided into running costs and lease costs.
Farms with a jeep in addition to a car should include all jeep costs under machinery. If the jeep is the only motor vehicle on the farm, include its costs under "car", making an appropriate reduction for non-farm travel. Enter the total value of the machinery running costs on the farm for the year – include fuel, repairs, tax and insurance costs.
Any lease payments paid during the year should be entered under "machinery leases". Loan repayments made on machinery should not be included under "machinery leases".
This is divided into overdraft/merchant credit interest and loan interest and should include bank charges and current account fees. The repayments themselves are included in the balance sheet.
This is a difficult one – what is the farm share of these three items?
As a rule of thumb for the car, it’s generally 66% for full-time farms and 25% for part-time farms. It includes tax, insurance, running costs, repairs and leases (if any). If there is a jeep/van on the farm, you can include 100% of all jeep/van costs with machinery and include only a small portion (10% to 20%) the costs associated with the private car under farm share.
Include farm share of depreciation of car with car expenses. ESB includes farm share of ESB bill for the year (generally 25% to 75% depending on farm size).
Likewise, phone include the farm share (25% to 75%) of the phone bill.
Divided into depreciation on buildings and depreciation on machinery. Include depreciation on land reclamation with buildings. The rates and relevant methods normally used are: power machinery 25% – declining balance; other machinery 12.5% – declining balance; motor vehicles (jeeps/vans) 20% – declining balance (farm share); land reclamation 10% – straight line; farm buildings 10% – straight line.
Depreciation should be calculated on net cost – total cost less grant and VAT refund.
Includes the total cost of any maintenance carried out on the farm during the year.
If the expenditure is large on a single item and if VAT has been reclaimed on the expenditure, then it should be entered as a capital expenditure on buildings in the balance sheet rather than a current expense in this section.
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