Finish the Year Strong for a Successful Year Ahead

The farm business includes many moving parts that require the managers' and owners' attention to detail.  The most successful farmers I have worked with develop a plan and work it.  They do not create a plan to appease those around them and just hope for the best. 

Consider the following as you begin preparation for next year:

1. Family

a. Consider your family members' mental, emotional, and physical health. 

i. How are you doing? Be honest. Do you or your family members need help in any of these areas? Make sure to check in and take the necessary time to care for each other.

2. Goals

a. Write out your goals. Use the SMART approach (specific, measurable, achievable, relevant, and time-bound).

b. Do the goals align themselves with your farm's core values, vision, and mission statements?

c. Share them with your team to hold each other accountable.

3. Financials 

     A. Record Keeping

a. It is a necessity to be organized in your record keeping. Begin today to develop a systematic approach to updating your records monthly with your accountant or on-farm bookkeeper. 

b. Keep records as detailed as possible for your different enterprises on the farm.

i. How can you accurately evaluate your enterprises if you don't include all the subcategories specific to your enterprises?

c. Determine how to track your family living expenses -- especially for sole proprietors.

d. Balance the checkbook account and close out the year.

     B. Balance Sheet

a. Inventory

i. An accurate inventory is of utmost importance when analyzing the farm.  Take the time to get accurate feed, animal, pre-pays, and growing crop numbers (count, weigh, measure, calculate). Do not take this for granted.  Inventory affects liquidity and working capital ratios.

b. Accounts payable and receivable

i. Make an effort to account for everyone and everything applicable. 

ii. Accounts payable should be listed as such if they have not been expensed into the farm business. (Examples include seed, fertilizer, chemical, custom hire, vet/medical, repairs, etc.)

c. Loan balances

i. Are your end-of-the-year loan balances, interest rates, payments, etc. correctly listed on your balance sheet?

ii. Current loans should be listed along with accrued interest and payment dates. 

      C. Analysis

a. Complete a farm analysis with the assistance of your lender or farm financial consultant and then review it with your farm team to identify areas of strength and weakness. Capitalize on your strengths and determine how to keep weaknesses from harming the business.

b. Complete an analysis year after year and analyze the data and trends. 

     D. Cash Flow Plan and Budgets

a. Plan the year out.  Project potential gains and shortfalls to prepare for the necessary adjustments or opportunities.

b. Use your updated records to compare to your plan on a monthly or quarterly basis to insure you are following your plan.  Make the necessary adjustments if needed.

c. Start early.  Fall is a great time to begin planning for the next year.  It prompts you to assure your marketing plans align with your projected cash flows.

     E. Taxes

a. Thorough records allow for smooth and efficient tax preparation.

b. Schedule a tax planning appointment during the fourth quarter with your tax professional. 

c. Put yourself in a position to succeed with anyone who may need your taxes to support financial and investment activities.  In short, get it done.

     F. Insurance

a. Evaluate your insurance tools for proper coverages and utilization, including property and casualty, life, crop, livestock (LRP), dairy (DRP), etc. 

4. Production Records

a. Review your production records and make sound decisions based upon the data.

i. Livestock

ii. Crop

b. Know your cost of production for all your enterprises on the farm. Develop a plan to incorporate technology to help you collect and track the data.

5. Farm Team (Core or Entire Team)

a. Farm team meetings

i. This is a very important part of operating your business.  Small or large, at the kitchen table over a meal or in a more formal setting, try to meet consistently.  If the meetings aren't productive, then have someone help you organize the meeting and include all necessary team players at the meeting.

b. Peer groups

i. Peer groups allow you the opportunity to learn from each other, and they are conducted in many ways.  The group defines the rules of the activities.

ii. A facilitator is very important when meeting with peers.

Brad Sirianni is an ag relationship manager at Security Financial Bank. He has a vast knowledge of farm analysis. He worked as a farm business production management instructor for a combined 16 years before joining SFB. Contact Brad at 715-670-0729 or bsirianni@sfbank.com.