Financial management and dairy farmer satisfaction with performance

This paper reports on a study aimed at identifying financial management practices important in explaining farmer satisfaction with their business performance in the dairy farming industry in the state of New South Wales (NSW), Australia. Principal components analysis was performed on survey data from 204 NSW dairy farming businesses measuring the extent to which a wide variety of financial management practices were undertaken. This analysis identified five financial management dimensions: appraisal practices, environmental accounting, budgeting, aid use and analysis practices. Regression analysis, including control variables, indicated that greater emphasis on financial management was associated with greater satisfaction with business performance. Appraisal practices, including calculating the payback period for investments and assessing the relevant costs and benefits of decision alternatives, were found to be particularly important in explaining satisfaction. The emerging techniques of environmental accounting were also found to have a unique relationship with farmer satisfaction. The findings provide further support for prescriptions in the literature that farmers should invest time and effort into financial management.