Now is the time of year where it’s easy to shift all of your focus on production. But, now is a critical time to update, revise and analyze your budget, as well as spending, liquidity and other key business measurements.
“We are dealing with low commodity prices and other financial challenges, and more are likely ahead,” says Chris Barron, president of Carson and Barron Farms in Rowley, Iowa, and a financial consultant for Ag View Solutions. “Being proactive now can save us from some potentially catastrophic problems in the future.”
Here are key items, Barron suggests, to add to your financial checklist.
- Monthly Pulse: At the end of each month, generate consistent reports that show cash on hand and loan balances. Review accounts receivable and accounts payable. Examine the balances of any lines of credit, including all other third-party loans and seed or crop-protection loans.
- Cash Flow: Stay focused on this category weekly or monthly, at a minimum. Compare projected versus actual cash flow, and keep your projections current.
- Production Costs: Analyze spending on each input line item. Question spending on anything that isn’t directly, or at least indirectly, related to productivity.
- Debt Service: Evaluate total principal and interest payments quarterly. Are you able to stay current with all payments? Are your payments for long- and short-term debts feasible on a per-acre basis?
- Working Capital: Do you have ample liquidity to operate from one year to the next? If cash is tight, what options do you have to access additional capital? If cash is sufficient, are you maximizing opportunities?
Read more from Barron in his recent Top Producer columns.