There are two main types of stock finance contracts.
The farmer has purchased and owns the stock via a finance agreement.
The stock company owns the stock. This effectively is a grazing agreement.
The approach to the management of stock finance contracts depends on the specific terms and conditions. We strongly advise you to talk with your accountant about the best practices for managing stock finance contracts. This is generic information.
You own the stock.
If you own the stock and the stock company or a livestock financing company effectively loan money to you then you will need to pay back the loan with interest. Normally the loan is repaid (with interest) when the stock is sold. However, in some agreements, a weekly fee is also required.
Stock arrives on Farm:
When the stock arrives on the farm, in the Needs Action screen enter the purchase of the stock by recording a Money out invoice.
Create a Money-out invoice for the purchase of stock.
The date, other party, and reference reflect the corresponding information on the stock invoice.
Code the stock purchase. Select the stock code the animals relate to and enter the quantity purchased and the average weight. Enter an estimate if you are unsure. The date they arrive on the farm is the Event date. This will be recorded as a stock purchase. Add a description and use the note function to record additional information. You can claim the GST on the purchase of the stock straight away. Click save.
Create a Money in invoice for the loan. It should be the same amount as the purchase price of the stock including GST.
Code the loan invoice. You can create a new code under Other > Loan Repayments > Stock Finance Loan. We suggest you attach a copy of the contract to this invoice for future reference. Click save.
Go to the Matching page.
Select the two invoices relating to the purchase of the stock and the related loan.
Click Link and Match. This will send the invoices to the Completed page.
Stock leaves the farm:
When the stock is sold you need to repay the loan and interest. This is either deducted from the money you receive at the time of the sale or via a separate invoice. When the stock leaves the farm, in the Needs Actions screen enter the sale of the stock.
Create a Money in invoice.
The amount will be actual money received in your bank account.
Code the invoice, select the appropriate stock code, and enter the quantity sold and weight. The date they leave the farm is the Event date. This will be recorded as a stock sale. Add a description recording who the stock finance contract is with and use the note function to record additional information. Then click Save.
Create a Money out invoice for the loan.
Code the loan repayments under Other > Loan Repayments > Stock Finance Loan. Then click Add a new line.
Use the second line to record the interest paid. You can create a new code under Interest & Rent > Interest > Stock Finance Interest. Then click Save.
TIP: If creating new codes refer to the Add a new farm code help center resource.
The stock company owns the stock
As the stock is not owned by you it is effectively a grazing agreement.
Please see the link to Manage grazing stock in Farm Focus for how to record this in Farm Focus (Section: Record grazing stock coming on-farm).
You may choose to create a new code to manage this within Farm Focus. Farm Income > Other Farm Income > Stock contract Income. Otherwise, use the standard code Farm Income > Other Farm Income > Grazing Income.
More information