Baselining profitability

Your latest set of accounts shows profitability for the last two years. While by law accounts must show the income and cost figures that make up the profit figure, these figures are typically not presented in a standard, easy to understand format.

This calculator will help you organise the figures so that you can see where trading income, excluding BPS, currently comes from

• Farming
• Agri-environment and other payments
• Farm diversification

Splits trading expenditure between

• Variable (or direct) costs
• Fixed (or overhead) costs

In addition, it will help you estimate the cash needs of the business, which is the personal and capital spending that profit must cover to be viable.

Once you have input all the figures, the net profit figure (for both years) must equal what is in your tax accounts. If not, you need to recheck the figures entered.

There are handy tips throughout identified by the i icon.

Print your results

What now?

Although the picture may look daunting, there are options you could adopt to offset the loss of BPS income:

• Improve the performance of your livestock, pastures and crops.
• Provide public goods and services.
• Consider changing how you farm to reduce your reliance on inputs and capital investment.
• Diversify into non-farming activities.

How you change your business to cope with BPS withdrawal may involve taking advantage of all four options. The challenge is choosing the best way forward for your business.

Move on to the Step Two: Opportunities to deal with the loss of BPS and Step Three: Developing a plan to mitigate the loss of BPS sections to read about the decision-making process involved.

In addition to our tool, the AHDB website also has a changing BPS calculator and suggests where you can apply for consultancy help to review your options: Basic Payment Scheme (BPS) Impact Calculator for farm businesses.

Find out what the farming, environmental and diversification options available to offset the loss of BPS, and how to decide upon the best option available to you to offset the loss of BPS.