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New year provides good point to assess financial outlook, set goals

By Aimee Schomburg, La Crosse Western Technical College

The start of a new year is a good time to assess your farm’s financial condition. The steps outlined here and in the Fearless Farm Finances online course highlight best practices we’ve seen from farmers enrolled in Farm Business and Production Management at Western Technical College (WTC).

Start by identifying the farm’s strengths, weaknesses, opportunities, and threats (known as a SWOT analysis). If you are lucky enough to have others on your farm team, have everyone do this individually, and then discuss what you’ve each identified.

From there, you can set goals. You can find plenty of research out there that shows those who take the time to set goals, write them down, share them, and review them throughout the year are more successful. Make sure you are setting personal growth goals as well as family and business goals. If you want to be able to set money aside for retirement or your children’s education, include those goals in your plans.

The first two modules of the Fearless Farm Finances online course walk you through the reasoning behind a SWOT analysis and goal setting. You can use the companion worksheet to structure your goals. fearless-farm-finances-online-course
• Free
• Self-Paced
• 15 Modules

Balance Sheet & Cash Flow
If you didn’t complete a year-end balance sheet, you can do that now for 2018. List everything you own (assets) and everyone you owe (liabilities). This helps you not only establish some farm financial ratios, but also gives you the ability to see your net worth from year to year to ensure it is going in the direction you desire.

This is also a good time of year to create your farm’s annual cash flow projection. The goal is not to meet the plan 100%, but to help you think through your farm’s production, marketing, and finances in a more thorough way. The projection helps you put all the pieces together. Then have your farm management team review it and ask “what if” questions. What if this market doesn’t happen? What do we need to make up for a loss of a crop? You can use this cash flow projection to monitor your progress as the year unfolds.

The Fearless Farm Finances online course covers balance sheets and cash flow in modules 5-7. These modules include companion worksheets that show you the numbers you should track.

As you work on your cash flow projection and other budget sheets, keep in mind your family living costs. What does the family draw from the farm or what does the family need to live? Many times, we find that farmers do not track these costs well. Sometimes, it isn’t the farm that is the problem financially, it is the family living costs that may have risen without the farmers realizing it.

Professional Help
A farm business professional can help you complete an analysis of your farm business. This analysis should include your financial statements, reveal costs of production, show your numbers for the farm financial standards measures, and much more. The analysis can cover the whole farm or dive deeper into each enterprise on your farm.

You’ll need to provide beginning and ending balance sheets, plus records of production, income, and expenses. The companion exercises from the Fearless Farm Finances online course can help you create these records.

Performing an analysis each year will reveal trends, identify inefficiencies, and stimulate discussions that can be brought into your daily work.

Finally, take time in your “off-season” for yourself. You are a critically important and valuable asset necessary for your farm’s success. Use these winter months to read about those things you questioned during the growing season. Winter is certainly the time for workshops and conferences—attend some! Invest in your personal growth and get energized for the growing season that will soon begin.

Aimee Schomburg is a farm business instructor at Western Technical College in La Crosse, Wis.


From the January | February 2019 issue

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