During our recent BigYield.us webinar, viewers were particularly interested in hearing about farm finances and financial planning for 2017. In this story, Successful Farming outlines 16 questions for agriculture in 2017. Farm financial conditions topped the list.
Here, we recap three financial pointers addressed by one of our webinar speakers. We hope you consider these as you’re preparing for the year ahead.
1. Project your cash flow reasonably.
A cash flow projection, which gets at liquidity, examines whether your operation can meet its financial obligations and not come up short. In particular, take a look at your current ratio. It divides current assets by current liabilities.
Current assets are those that you can convert to cash within one year. On the other hand, current liabilities are payments you must make within a one-year period. Knowing these numbers can indicate whether you can pay your bills or whether some tweaking is necessary.
2. Realistically estimate your operation’s breakeven point.
In a breakeven analysis, estimate your costs and production potential. For crops, consider costs for seed, fertilizers, yield-enhancers, weed and insect control, crop insurance, debt payments, storage and so forth. You’ll also need to make acreage and yield projections.
Ultimately, this analysis can guide marketing decisions. If prices reach a level where you can comfortably break even and profit, then knowing your breakeven can you give confidence about making the right marketing decision. Without a good breakeven evaluation, you may miss good marketing opportunities or choose those that don’t guarantee a profitable outcome.
3. Write a business plan that tells your farm’s story.
A business plan matters to you and your family because it charts the course for your operation’s future. It has also importance to others including lenders, loan underwriters, input providers and landowners who work alongside your farm. A good business plan can give assurance that you can meet your obligations.
When you make assumptions in your plan, justify them as best as you can with historical data or other verifiable sources. By putting your plan to paper, you show that you’ve invested the effort to really consider your current and future position.
Throughout the next year, we at BigYield.us want to be a resource that can help you save money, make money and save time. We’re currently planning our research program for the year. From our research, we hope to develop recommendations that will yield good returns and a strong financial position for your operation. In this video, Kent Kauffman of BigYield.us shares more about our research focusing on ROI during 2017.
For more information about planning for 2017, please call or email anytime.