The Importance of Having Good Financial Information

In the current ag environment managing your farm properly is imperative. Being a good farm manager starts with knowing your cost of production, breakevens and cash flow. Most of this can all be easily analyzed with good record keeping.

Managing your risk is also important and starts by putting a good grain marketing plan in place.

No matter what size your operation is, good record keeping and having accurate year-end financial statements are not only helpful for checking off your lender’s list, they also serve as good management tools in making well thought-out business decisions and can help you:
• measure year-over-year trends and changes in net worth.
• better measure your accrual-adjusted income. Accrual adjustments help match up changes in inventories, receivables and payables rather than only the cash and depreciation a tax return shows.
• succession plan. This process often takes several years. By having good financial information for both the retiring generation and succeeding generation, planning can go smooth. The retiring generation’s need for income must be balanced with the ability of the new farmer’s financial abilities. This can also be helpful for planning with other family members.
• tax plan. A balance sheet can indicate future tax liabilities. For instance, deferring grain proceeds and having a high level of prepaids before year-end often results in high tax consequences as a farmer transitions to retirement or cuts back. It’s also helpful to measure tax liabilities during a growing operation.
• structure your debt. A healthy operation finds balance between long, intermediate, and short term debt. Everyone’s circumstances are different. Adequate working capital and a positive cash flow are two items to aim for.
• analyze each commodity or enterprise.
• determine spending trends for both business and personal expenses.
• evaluate how the year went compared to projections.

We hope these points are helpful as you continue to prepare for the 2019 crop year and if you need assistance in analyzing your numbers and/or assessing your financing needs, please contact your local Business Relationship Manager.

As a reminder, 2019 Retailer finance programs have been established and are ready for you to take advantage of. Please visit with the AgQuest Business Relationship Managers, or your Account Manager, for details on our Companion® secured and Direct loan programs.