It takes more than a tractor and a few barns to run a successful farm. It takes solid judgment and a sound business acumen. Financial mismanagement has foreshadowed the demise of many farms and agribusinesses. Don’t let yours become another statistic.

Let’s take a look at a few areas to help you manage your farm’s finances. Keeping abreast of these metrics, and the trends they display goes a long way in helping you maintain a successful operation.

Manage Debt

In an ideal world, I’m sure you’d love to pay cash for everything on your farm. Be that as it may, you might not have an extra $650,000 lying around to buy that new combine when the time comes, so you get a loan to purchase it. Debt in and of itself is not bad, it’s a tool. It’s how you use the tool that determines whether or not you’re being responsible with it.

Ask yourself, “will taking on this new payment obligation help my business grow, or is it unnecessary (or even reckless), based on my situation?”

If taking on new debt won’t help you increase your farm’s income, give serious thought to whether or not it truly makes sense to potentially jeopardize your future by only thinking about “right now.”

Record Keeping

As do most things, your farming profits ebb and flow throughout the year. Show me a farmer with the best-kept records, and I’ll show you a good farm business owner.

• Are your profits trending up or down?
• Is what you see the beginning of a potential windfall/disastrous situation, or is this an anomaly?

Keeping your books up-to-date in a painstaking manner allows you to monitor and analyze these fluctuations and react accordingly to help you ensure you’re working toward profitability.

Analyze Your Financial Situation Regularly

Like many business owners, you probably don’t enjoy paperwork. You didn’t start your farm so you could sift through pages of financial statements. Yet, this step is an imperative part of running any successful business – hence why you should keep your books accurate.

Analyzing financials, such as your farm’s balance sheet, cash flow statement, and income statement give you a deeper sense of the inner workings of your farm. These statements allow you to plan accurately – based on hard facts – adjust to increasing or deteriorating income (when viewed over several years), and show the bank you’re a good candidate for loans when the need arises.

Armed with the knowledge that your farm is self-sustainable, it’s time to prepare for the worst-case-scenario and implement preservation plans to secure your farm’s financial future.

Protecting Yourself

How well are you prepared to rebound from a potentially devastating financial loss? Are you able to bounce back and roll with the punches, or will you find yourself on the brink of bankruptcy? This is where a sound risk management plan becomes invaluable to you, your family, and your farm.

If you don’t have the correct pieces and parts in place, or you’re essentially gambling, betting that nothing bad will happen to you. You’re risking a lot to save a little. If you’re unsure whether you can remain sustainable after a large loss, it’s in your best interest to review your insurance program with a qualified professional. From there you will know exactly how to protect from any of life’s “what-ifs.”

Farming is tough. But the better you manage your finances, the less stressed you’ll experience from your operation. While we can’t help in all aspects of your financial management, we can help when it comes to protecting you, your family, and your legacy. Before your next insurance renewal, let’s connect to ensure you have everything in place for when things go wrong.