NW Call to Action
Farm Buying Toolbox
Final sale of the season!
Land sales are almost over.
The time to buy real estate has almost passed us by. If you need to make financial gains in your operation, you better start now.
For 3 days only, I'm offering the Farm Buying Toolbox on sale for the final time this season. HERE
That's 14 years of farm buying and finance experiences over hundreds of deals. Save yourself the time, I've learned how to do this for you and am sharing everything I know in the Toolbox.
Learn how to buy ground, so you can buy more: Faster and Cheaper.
(If you aren't ready yet, you can be notified when it is for sale again: Farm Buying Toolbox | Farm640.)
SW Financial Literacy
Bad Cash Flows
The easy way VS The right way
What does a good cash flow look like?
Your upcoming crop year cash flow needs to be your cash flow. Don't ask your banker, financial planner, or CPA to build this for you. These are bad cash flows. Only you can know where your expenses will fall and how you plan to manage and sell your grain inventories.
If you have never built one, use previous tax return expenses from your schedule F to create a baseline. Then you need to pick up the phone and start calling input suppliers to get a feel for where expenses could fall.
As you get more comfortable with this process, a more advanced spreadsheet would include the breakeven by field. This helps you determine which fields should be culled when considering a 1031 exchange or where you may need to negotiate for lower rents.
Those details will make your operation more efficient and profitable.
There are many different types of cash flows out there. My favorite, and the most frequently used that I see, are excel spreadsheets created specifically for each individual operation. Also, dozens of paid cash flow programs are available which many have different functionalities. Some are more useful for your CPA while other programs offer better flexibility for the farmer.
Don't be afraid to try several of these options to see which connects best with you.
Update your cash flow regularly. A cash flow should not be created at the start of the year and then reconciled at the end of the year. It did nothing to help your operation if utilized this way.
And speaking of helping your operation, use your cash flow for decision making!
How can this be done?
For starters, compare cash flows year over year. Align your previous five years of cash flows and look for places where expenses have rose significantly. If repairs have been getting out of hand, investigate which equipment may be holding you back and if it is time to make an upgrade. As crop & property insurance costs are on the rise, and the percent of your expenses going towards insurance increases, check with your insurance agent (or even better a competing insurance agent) to see if there could be cheaper alternative options which would still give you the protection you desire.
The same goes for your income. Adjust yield estimates based on the condition of your crop. If grain markets have risen or shrunk, you need to update profit potential accordingly. This will help you adjust your grain marketing on the fly.
What if equipment breaks down mid-year? Or maybe you are approached by your landlord's heirs asking you to buy the ground now (in July)? Instead of making a high impact farm decision now, not knowing how your year will turn out (or how your balance sheet will look until year end when you meet with your banker), you can be armed with the knowledge that you are headed towards a profitable year or a very tough year financially right now. Then decide accordingly.
The more time you spend with your friends, the better relationships you have.
The more time you spend with your family, the better understanding you have of each other.
The more time you spend making decisions with accurate information, the better decisions you will make.
Time spent with your financials pays.
Need help with your operation's financials?
Have you updated your financial statements for the year?
Did you complete a review of your position with your lender?
If not, this is a dangerous step to skip. How will you know if you are in a position to buy ground (and how much ground) without getting a lender's feedback? How can you learn anything new without a review?
If you missed this crucial step during your renewal appointment, there is still time. I've opened up 30-minute financial review consultations helping you:
Update your balance sheet for the year if not yet completed.
Give feedback on the strengths and weaknesses of your position.
Help you plan for growth.
Sign-up here if my services can benefit your operation:
Also, I want to continue bringing you the resources to help you grow while in a healthy financial position. If you ever have an interest in the Farm Buying Toolbox, sign-up here:
I can’t wait to be in touch and start helping you toward your goals.
Have a great week!
Grant
