As a farmer or agricultural producer, you have a lot on your mind. Will the weather hold out for harvest? Do you have the necessary equipment to be successful? How will you protect your legacy for future generations?
Your financial well-being is just as critical to your farm’s success as the daily operations. Yet working alongside financial professionals can be overwhelming. This is even further compounded when you need to meet with your lender in order to ensure proper funding to maintain your agricultural operation.
Financial Items to Know in Relation to Your Farm
While finances may not be your forte, here are a few things that are essential to understand as you work toward the well-being of your farm:
- Your financial statements and what they mean. Do you know what your profit margin is? How much is aging in your accounts payable? Items like these are critical to understand as you look to grow, expand or even maintain your agricultural operation.
- Key ratios and performance indicators. What does success actually look like for your farm? How do you want to grow in the next five years? What can you improve upon? Selecting and measuring key indicators, as well as understanding what they mean, will help set you up for long-term success.
- Important reporting requirements. The information you report related to your operation will impact your tax situation, your year-end planning and more. Plus, constantly changing rules and regulations are important to stay on top of in order to maintain compliance.
How to Stay on Top of Financial Specific Items
Tight cash flow or outstanding debt are difficult topics to understand and hard to manage. Not understanding your financial situation will only compound the problem. That’s why it’s important to have a financial professional review your accounting records on a regular basis.
There a variety of types of financial professionals that can help.
- Your tax provider can help you regularly plan for year-end tax planning, as well as plan throughout the year to take advantage of various tax-saving opportunities and deductions.
- A bookkeeper can maintain a record of your accounts, ensuring you have the information all compiled in one location to make important financial decisions.
- A new trend in the agriculture industry is the use of an agribusiness finance specialist. These consultants have first-hand experience in both agriculture, ag lending and general accounting principles. They assist farmers and ranchers in improving the overall management of their operation and planning for future success. An agribusiness finance specialist can also serve as a second, unbiased person in the room when meeting with a lender. Those meetings can be difficult, even for ag owners who take the time to check and double-check their financials. Having a specialist there can help ensure both you and your lender that everyone is putting their best foot forward in these discussions.
The Importance of Maintaining and Understanding Your Financial Information
Having the right business consultants in your corner can make all the difference to your agricultural operation. Gaining a good understanding of your financials, as well as the reporting requirements will help you become a better advocate for your farm. Plus, this information will allow you to make crucial business decisions with ease and run a successful operation.