Element 2 - Target services to the needs of clients in the rural sector
Clients in the rural sector have very specific needs, especially with the close ties between a farm as a business, a family home and a primary producer’s identity.
The case management approach requires an holistic assessment of all factors that may impact on a primary producer and their family’s capacity to implement change.
For example, a client presenting with a loan repayment issue, may well have issues with anxiety and depression. Issues with depression may cause relationship difficulties.
Is it being professional to only acknowledge and deal with the specific need being presented? Has the rural financial counsellor really been of service and met their duty of care if a loan repayment schedule is renegotiated, but a debilitating case of ongoing depression is ignored?
2.1 Undertake financial counselling work that reflects understanding of a farm as a business enterprise as well as in the context of a family enterprise
For many primary producers, being able to define the financial performance of their enterprise is a foreign concept. Many are guided solely by a common accountancy practice of sorting accounts alphabetically for tax purposes. This practice can hide underperforming enterprises in the total farm cash flow. Once enterprise performance has been exposed, the primary producer can then see for example, that a portion of an enterprise that occupies 80% of her/his time might only return 20% of her/his profits. The primary producer might discover that some aspects of their enterprise habitually make losses.
A challenge for the rural financial counsellor arises when a cherished enterprise is exposed as a consistent loss maker. For many, farming is not just an occupation. For some it is a statement of identity—a reflection of worth and ‘place in the world’.
Change can be challenging and confronting for many primary producers when they experience the weight of family and individual expectation, family history and tradition on the land.
The broad range of enterprises is obviously dictated by climate and land capability, but individual enterprise selection can reflect a family tradition. A primary producer might identify himself, for example as a cattleman, or a Hereford breeder.
Maximising financial returns may not be the principle goal of a primary producer’s life, but when a farm is in financial difficulty, hard decisions sometimes need to be taken. Rational economic decisions are going to be difficult for the primary producer whose enterprise mix is largely driven by traditional identification with a specific industry.
1. Describe how you might work with the primary producer described above to make a decision that maximised financial returns.
Did you mention that the role and skill of the rural financial counsellor in this situation is to be an objective, clear communicator who will facilitate the provision of existing factual details on the farm enterprise? The rural financial counsellor will need to discuss the implications of possible courses of action but it will always be up to the primary producer to use this information and ultimately take responsibility for the next course of action. The primary producer will be in the driver’s seat and can elect or not elect to make changes to the current way of operating.
2.2 Ensure financial counselling work reflects understanding of family enterprise and its links/relationship with rural and farming business
The family farm as an enterprise is an interesting phenomenon. For example:
The family can see their identity as inseparable from and intrinsically linked to the land. This can mean that failure of the business and loss of ownership does not just mean financial loss, but total and irretrievable loss of identity and sense of value and purpose. For some this represents a triple failure: failure to ancestors who passed down the farm; failure to wife and family for not providing for their needs; and failure extending to the next generation for depriving them of the opportunity to continue the farming tradition.
The farm is at the same time a source of income and recreation. It is both backyard where friends are entertained, and factory floor where income is wrought from hard decisions and hard labour.
It is a place of both danger and refuge. Workcover informs us that the farm is outdone as a place of death and injury only by the mining industry. Yet it often comprises settings of great beauty and tranquillity.
These many peculiar aspects of the family farm business must be understood for financial counselling to be effective. The inexperienced rural financial counsellor can assume the course of action that produces the best financial return on assets is the only plausible action. But the viability of all actions must be understood in terms of the personal world view and goals of the primary producer and family.
The rural financial counsellor who is technically correct, but totally ignored, cannot be said to be operating effectively. There is no gain from developing a grand economic or agronomic plan if the primary producer will not follow it due to their personal beliefs.
It should be noted however that externally imposed financial deadlines can mean that a thorough exploration of all the primary producer’s goals is not possible. Often clients seek the assistance of a rural financial counsellor when external action is imminent.
1. How might you work with a primary producer who is facing the removal of a facility, has no useful records and whose enterprise plans for the next 12 months are not viable in your view? Outline the steps you might take.
It could be argued that the role and skill of a rural financial counsellor is to identify the family’s world view and work with them to plan action that will sustainably achieve their goals.
2.3 Apply knowledge of financial aspects relating to planning and management of a rural enterprise
A major goal of financial counselling is to assist farm businesses to be financially self-reliant. For those farm families that may be unviable in the longer term, this could mean exiting farming.
Sound planning and management are essential steps towards achieving self-reliance.
The numerous approaches to planning and management suggest different ways of thinking about the business. A popular example is the Holistic Resource Management model. This model could be seen as a thinking process that encourages a thorough understanding of all the elements and processes involved in the interaction between humanity and their environment (Savory 1990).
While management philosophies vary widely in their systems and processes, good planning must deal with three basic things.
- Know the current situation
- Know the destination
- Know the steps between 1 and 2.
While the above is obvious in theory, clarity is often lost in practice.
1. Knowing the situation is multifaceted. It should include:
- knowing current assets and liabilities
- knowing the history of the above
- knowing the exact terms and conditions of all liabilities
- knowing the historic seasonal cash flow trends
- knowing the enterprise performance relative to appropriate benchmarks
- knowing operating profit per hectare
- knowing the external factors that impact on the relevant commodity prices. This will include:
- currency fluctuations,
- changes in world stocks, and
- changes in world supply and demand
- seasonal growth probabilities
- knowing the health of the farm resource, including:
- soil fertility, pH, and fertiliser history
- pasture composition and its changes over time
- water storage, quality and reliability
- crop production history, inputs and outputs
- livestock yield trends
- knowing the management and operational skills and deficits.
2. Knowing the destination
This can be thought of in terms of the key issues identified in the analysis of the situation, or by identifying some other key variables. For instance gross margin per Dry Sheep Equivalent (DSE) might be a key livestock production goal. It might be more sensible to set individual goals for the enterprise based on income per unit and units produced. Another key goal could be whole farm operating profit per hectare. It could of course be to spend more time with a spouse and children. The Holistic Resource Method (Savory 1990) argues that all actions should be measured against a ‘Holistic Goal’. This, Savory describes as a goal that encompasses quality of life, forms of production and future resource base.
3. The steps
It needs to be clear that activities actually lead towards objectives. Steps need to be both logical and quantifiable. A basic rule is that the first dollar must go where it is most needed. Using scarce resources to perfect an already performing part of the enterprise is questionable. Simply testing the relative return on each investment in the budget will assist the decision process. Remember without profitability, the business is lost.
The judge of the success of the plan must fundamentally be about financial self-reliance and/or profit. Without financial self reliance, no other objective can be realised (not sustainably anyway). It is also important to recognise for some primary producers, their lifestyle and off-farm income may also be a way to achieve positive outcomes and financial self reliance. Profit may not be the imperative.
The Enterprise Action Plan (EAP) created by the Department of Agriculture, Fisheries and Forestry is an excellent tool to facilitate accurate and comprehensive assessments.
The rural financial counsellor must develop excellent financial and analytical skills. Equally, the rural financial counsellor must be skilled at communicating financial situations in an unambiguous manner.
Knowing the finances
There are some basic must know data to understand the financial situation of a primary production business.
- the cash position and its history
- the monthly fluctuation of the cash flow
- the market value of all assets and equity position and its history
- the detailed conditions of all loan facilities
- the individual enterprise performance.
Additionally, simple means of presenting the data to the client is also essential. Below is a simple example of a summary of enterprise returns, equity and business performance.
Additionally, some primary producers and all lenders think in terms of key ratios. Each lender has its own system, but the concept is simple enough. Below is a simple example of ratios that examine different aspects of performance as a percentage of income. Each of the four parameters is divided by business income to produce the ratio.
For many primary producers, the key to understanding financial performance and budgeting is the enterprise gross margin (GM).
For the novice, average gross margin budgets are obtainable from all departments of agriculture. Analysis of the GM will allow the primary producer to understand the key drivers of income and examine what traditional movements in these figures have meant to profitability. The concept of risk management also begins with a historic analysis of the variability of key drivers of income. Further budgeting efficacy can be enhanced with the creation of parametric budgets based on enterprise GMs (see example below). The advantage of this display is that discussion can be focussed on realistic historical performance. For example, if the lamb enterprise has shown a historic weaning range of 90% to 100%, and lamb prices had shown a historic range of $60 to $80 per head, would it be reasonable to budget on a $40.44 GM/DSE? Realistically the range should be from $23.80 to $31.40.
1. List the key financial variables you would use to analyse a rural business and explain the significance of each.
2.4 Collect information, including views of key stakeholders and representatives from relevant target groups, and use in the delivery of rural financial counselling services
To be an effective rural financial counsellor it is important to monitor the political and economic environment and the views of key stakeholders and representatives from relevant target groups.
1. Read your local rural newspaper, such as The Land, and a state-based, city-centric newspaper such as the Sydney Morning Herald or Daily Telegraph.
Find as many references as you can on rural issues.
Then write down who are the key players in the article—politicians, local councillors, farmer organisations, a community group etc.
All these groups contribute something to the mix. They all represent a legitimate, although often contradictory perspective, on the role of the rural financial counsellor.
Look at the list of government and non government agencies below. List five groups that as a rural financial counsellor you may need to consult. Explain what information you would hope to gain from each.
- Department of Agriculture, Fisheries and Forestry
- State departments of Primary Industry/Agriculture
- Department of Families, Housing, Community Services and Indigenous Affairs (FaHSCIA).
- Australian and State Government health departments
- Rural Assistance Authorities
- Premiers’ departments
- Shire councils
Non Government agencies and peak bodies:
- Livestock Health and Pest Authirities [previously known as Rural Lands Protection Boards (only in NSW)]
- Producer organisations
- National and State Farmers Federations/Associations
- Industry marketing associations
- Community organisations such as the Country Women’s Association
- Business and finance groups
- Banking associations
- Accounting and financial planning associations.
Wide consultation with the groups can bring a collective wisdom on the issues that are affecting the clients rural financial counsellors will assist.
2.5 Make appropriate referrals as required, using knowledge of local support networks
The needs of a family farming business experiencing difficulty can be numerous. The expertise required to provide the appropriate support can include:
- marriage guidance
- government assistance and services.
Ethically, it is important to provide clients with a range of choices to consider. It is also acknowledged that this can prove difficult in rural and remote areas where the range of service providers can be sparse. However, the rural financial counsellor cannot select the service provider on behalf of the client—it is a decision that the client should make from a list.
People can find it extremely difficult to seek appropriate assistance. This again can be due to cultural conditioning. Primary producers can be extremely independent and unaccustomed to seeking assistance. This can also mean that the farming family are unaware of the diversity of services available.
Remember that for a primary producer who may by nature be a very private person, the prospect of divulging personal information (financial and family relationships) to an outsider can be extremely daunting. If the rural financial counsellor refers them on, they are then faced with the emotionally exhausting prospect of repeating this procedure. The primary producer might just decide that once was enough and not proceed with the referral. One strategy to support a distressed client in this situation is to accompany them, introduce them and explain the situation with them.
Referrals always involve issues of privacy and permission or authority to make representation. It is important that wherever possible the rural financial counsellor should empower the client so they remain in control of the situation. A potential referral should therefore be presented as an optional choice along with others. Working with the client to develop a strategy and providing useful information about each alternative choice is most helpful. It is also important that referral letters are not disempowering to the client. The rural financial counsellor’s job is to be knowledgeable about appropriate available services, but not to take control. DAFF has a specific referral policy for rural financial counsellors which can be accessed at http://www.rfcs.gov.au.
1. If you are concerned about the psychological health of a client and fear they may be suicidal, what would you do to get them the appropriate help?
Did you mention that all workers have a duty of care to take all reasonable steps to get a person who is expressing suicidal thoughts to appropriate care?
Mental Health First Aid suggests that you should always ask the questions: Are you planning to harm yourself? Are you planning to commit suicide? Try to ensure that the person is not left alone, remove all potential risks such as knives, keep calm, do not minimise or disbelieve their distress and get appropriate help.
1. Write a letter of referral to a GP for a client who you believe is depressed. Remember the letter might be revealed to the client.
2.6 Advocate on behalf of clients in the rural sector where appropriate
Support can occur in a variety of settings—in the office and ‘on farm’, in a family meeting or in a mediation meeting with a bank.
Support can take many forms.
In practical terms, this can include assisting a client to make phone representations to clarify the financial situation with a bank. It can involve providing information on government programs and services, or assisting a client present a case in a formal or informal mediation hearing. When fostering a client’s self-determination it is important to encourage a client to be an active participant in the process and to take responsibility for any decisions made.
While the advocacy action detailed below is support, it can also be as simple as listening carefully to a distressed primary producer.
A fundamental tenant to supporting someone is that you don’t have to agree with them to offer them support. A rural financial counsellor is called on to represent the best interests of the client. This obviously needs to take place within the bounds of the law and the RFCS Program’s Code of Conduct for management committees and employees of Rural Financial Counselling Services.
Advocacy can be described as the practice of directly representing or defending clients’ interests and ensuring that clients’ rights or entitlements are maintained.
Advocacy can include action to:
- empower clients
- enable self-determination and/or self-advocacy
- promote access to services, facilities or benefits
- achieve representation in decision-making processes.
(Corey, Corey and Callinan 1998 Issues and Ethics in the Helping Professions)
The rural financial counsellor often plays the role of advocate. The Institute for Family Advocacy and Leadership Development in Australia (IFALDA) has defined advocacy as:
‘the process of standing alongside an individual who is disadvantaged and speaking out on their behalf in a way that represents the best interests of that person.’
Advocacy has no prescribed or clearly determined method. What constitutes advocacy will differ in different circumstances and according to the skills and needs of the individual or group (IFALDA). Advocacy is not impartial because the advocate works entirely from the perspective and interests of the client.
Advocacy can take many forms. These can range from writing letters to creditors, requesting alterations to facilities, to assisting clients with formal mediation hearings.
An important first step in any advocacy is to be well prepared. Rural financial counsellors must gain as much information from as many perspectives as possible. The client may present only a partisan perspective on a complex situation. As an advocate, it is not desirable to be surprised by information you were unaware of. This situation can leave the rural financial counsellor with little time to fully consider options.
It is important to understand that rural financial counsellors can only support clients in non-legal appeals.
1. In the current rural financial counselling environment in which you are working list the forms of advocacy you could be engaged in.
2.7 Support clients in mediation and negotiation with third parties
A formal mediation hearing with creditors is possibly the most difficult advocacy role a rural financial counsellor will face. This is because it can be the last hurdle before a creditor can take action against the client.
Mediation can be described as the process by which the participants, together with the assistance of a neutral person or persons, systematically isolate disputed issues in order to develop options, consider alternatives and reach a consensual agreement that will accommodate their needs.
Thorough preparation is the key to a positive outcome. When acting as an advocate in a formal mediation process it is crucial to gain a thorough understanding of the legislation that governs procedures. Without this understanding the advocate will be unable to provide crucial information and support.
As part of their preparation for mediation, the client should draw up documents containing personal details, present financial position, details of their property including a realistic current market valuation, a list of plant and equipment with a realistic current market valuation, cashflow budgets, livestock programs, cropping programs, shearing programs, a map of the property and copies of the last three years’ taxation figures for the farming operation.
There are a number of useful resources for preparing for a client’s mediation, including the NSWRAA website: http://www.raa.nsw.gov.au. You may want to check the Rural Adjustment Authority in your state for a similar checklist to inform the client how to prepare for mediation.
The pre mediation communication will set the scene in terms of the creditor’s demands. It is important to diligently evaluate all viable options and their financial and family implications before mediation.
It is prudent to research the other party’s desired outcome, and what their fallback position might be. Develop a list of things that your client is prepared to negotiate away in order to achieve the primary goal. Try and discover what is most important to your opponent and what losses are unacceptable to them.
Also develop alternative strategies with your client in case your plan A is not successful. Although a plan B might represent a less than desirable outcome, it might also be considerably preferable to a position presented by the other party.
Also consider your competence at assisting with the negotiation when you may be under pressure. Remember, you will be assisting your client negotiate with the creditor’s recovery team. If you are not a good negotiator, find another rural financial counsellor who is. It is quite acceptable to represent the client as a team (with creditor approval).
In summary, the primary producer needs to be in the driver’s seat in the mediation process and it will be the skill of the rural financial counsellor to assist and facilitate the preparation for this process.
1. How do you think a client feels when approaching mediation?
As an advocate in this situation, remember the stress your clients can be under. The average farm debt mediation process runs for six to eight hours and does not have to finish in one day.
You need to be constantly aware of your client’s state of mind. The sheer exhaustion that comes from months of stress culminating in an intense six hour meeting can distort judgement. A client might just give in, quit, rather than endure any more conflict and stress. Remember you can always call time out. Look after your client. Take them for a walk. Get them a cup of tea. Always remember how much can be at stake for them.
Consider what the consequences could be for that client if the loss of ownership of the farm is not only economic, but also an identity loss.
1. Check the current legislation in your state to determine whether formal mediation is a necessary process that must take place satisfactorily before a creditor can take action against a primary producer.
2. Provide a sequenced list of the procedures that lead to a formal mediation hearing in your state.
3. In your state, what legislation impacts upon the procedures for a creditor and debtor to discuss differences?
Consider the following situation.
Three brothers jointly own a farm. One brother’s wife keeps all the financials, and has done so unpaid for 15 years. Another brother’s wife often does mustering and looks after the farm’s horses. The third brother is just married and his wife works in town. Two of the three brothers have all worked on the farm all their lives, while the third has only been home for 10 years.
The farm has suffered a declining equity situation and the creditors are seeking formal mediation.
1. Detail the procedures you would undertake to assist the client to prepare for mediation.
A Cautionary note
Rural financial counsellors cannot act as a mediator between family business partners (for example) who are in dispute. In such cases the rural financial counsellor must refer the client to more appropriately trained professionals. This also applies with farm succession planning, any legal matters, and social counselling.
Assisting with a mediation process between a primary producer and creditors however can be seen as a co-operative problem-solving process, designed to help both parties to find constructive solutions to problems. It should be noted that a rural financial counsellor cannot play the role of the mediator—a mediator is formally trained and accredited in dispute resolution processes.
03 Dec 2009