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Seven Steps for Post-Harvest Financial Management

Date: 
Author: 
Joel Larson
Educational Opportunities: 
Articles
Interests: 
Grain, Young, Beginning Farmers, Specialty Industries, Women in Ag
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These low prices…wow! Good thing we all like a challenge. So, after hopefully a safe and productive harvest…it will be time to roll up your sleeves, sharpen that pencil, or fire up that computer. Whatever motivation you need to work through your own personal finances.
The following are seven post-harvest financial management tasks and considerations to get you started on analyzing your year and preparing for the next crop year challenge.
1. Update your Financial Statement so you will know where you are at.
  • Take the time to verify the accuracy including all cash balances, inventories, priced and unpriced grain, and accounts receivables.
  • Include your detailed machinery, vehicle, buildings, land, and investment assets. It may be a good idea to review your depreciation schedule to make sure you haven’t missed any new purchases or capital sales.
  • Create a complete listing of all of your liabilities, including accounts payables and current loan balances including interest rate, payment amount, and due date. Don’t forget about expected income tax.
  • Assess your change of net worth and working capital position compared to your previous financial statement. If you are tight or reflect a negative working capital, this will be the time to strategize on how to improve your position.
  • How much room is left on your operating note? Communicating this to your lender is an expectation for a good borrower/lender relationship.
  • Balance sheet preparation is time consuming, but it is vital to understand your overall financial position and how you are going to meet your remaining cash flow needs for the remainder of the year.
2. Update your year to date income and expense information
  • This information is not just for income tax management purposes.
  • Include capital purchases made in the current year.
  • Include non-farm income and family living expense.
  • This will allow you to determine your cost of production and your post-harvest break-even price.
3. Complete a projected cash flow for the remainder of the year.
  • How does this fit in with your working capital position, remaining operating note balance, and tax management?
  • Will you need to take out a CCC crop loan or an Inventory loan to meet cash flow needs?
4. Complete a cash flow comparison between actual and budget.
  • How close were you in your projection? How will this impact next year’s projection?
5. Update your marketing plan.
  • Record production history/crop insurance records.
  • List inventories, both priced and unpriced.
  • List current marketing positions including cash and futures or options contracts.
  • If you know your break even, are you marketing from that information?
6. Start working on next year’s cash flow projection.
  • Some producers find that FINPACK (Finflo) does a nice job laying out a projection and marketing plan. Others develop a spread sheet that meets their needs.
  • If you have a major expansion in mind, do you have a structured business plan?
7. Complete a personal recap of how the year has gone.
  • Major weather and production events that impacted your operation.
  • The purpose for this is to tell "your story" in future years.
Taking the time to complete these financial management tasks and consider some of these related questions will help you to face the challenges of today’s low commodity prices.
 

 
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