As a farmer or agricultural producer, you already have a lot to manage in your agribusiness. There are many issues to be concerned about; some outside your control and some you can. Will the weather hold out for harvest? Do you have the necessary agricultural equipment to be successful? Are your finances and operations streamlined? How to protect your legacy for future generations?
Your financial well-being is just as critical, if not more important, to your farm’s success as its daily operations. However, working alongside agribusiness financial professionals can sometimes be overwhelming. This is even further compounded when you need to meet with your lender in order to ensure proper funding to maintain your agricultural operation.
Financial Items to Know in Relation to Your Farm
While finances may not be your strong suit, here are a few things that are essential to understand as you work on increasing the profitability of your farm:
- Your financial statements and what they mean. Do you know what your profit margin is? Determining cost of production and profit margin are two things that have become really important the last few years. These are critical to understand as you look to maintain and grow your agricultural operation .
- Key ratios and performance indicators. What does success actually look like for your farm? How do you want to grow in the next five years? What can you improve upon? Selecting and measuring key indicators, as well as understanding what they mean, will help set you up for long-term success.
- Important reporting requirements. The information you report related to your operation will impact your tax situation, your year-end planning and more. Plus, constantly changing rules and regulations are important to stay on top of in order to maintain compliance.
How to Stay on Top of Financial Specific Items
Tight cash flow or outstanding debt are difficult topics to understand and hard to manage. Not understanding your financial situation will only compound the problem. That’s why it’s important to have a financial professional review your accounting records on a regular basis.
There a variety of types of financial professionals that can help. Your tax provider can help you regularly plan for year-end tax planning, as well as plan throughout the year to take advantage of various tax saving opportunities and deductions.
A bookkeeper can maintain a record of your accounts, ensuring you have the information all compiled in one location to make important financial decisions.
A new trend in the agriculture industry is the use of an agribusiness finance specialist. These consultants have first-hand experience in both agriculture, ag lending and general accounting principles. They assist farmers and ranchers in improving overall management of their operation and planning for future success.
Agribusiness Finance Solutions
Planning for success is easy with an agricultural finance specialist on your team. Having an advocate focused on your business and operations allows you to focus on successfully running the daily operations.
If you have a tight cash flow or debt to manage, trying to analyze all your financial statements can be a daunting task. To be prepared to communicate effectively with your business partners and ensure a successful operation, it's important to have a solid understanding of:
- Your financial statements and the surrounding terminology
- Key ratios and what they mean for your operation
- Important reporting requirements
If you're feeling pressured by your debt-to-asset position or are looking to better manage your cash flow for succession planning and retirement, you could benefit by working with an experienced Agribusiness Finance Specialist. Gaining a proper understanding of your financials and compliance requirements can help you better advocate for your operation and make important decisions with ease.
Your agribusiness finance specialist should also collaborate with your valued agricultural business partners in order to further streamline your operations and increase productivity and profitability.
Eide Bailly’s Agribusiness Finance Solutions team provides very specialized services for our farming clients. We’re one of the only accounting firms that offer this to our clients.
"Having access to this service gives us that second unbiased person in the room when meeting with a lender,” says Mike Elsen of Elsen Homestead Farms. “They have helped us gain a better understanding of our financial situation and provided options and insight that will greatly improve the future viability of our farm."
Hear more from Mike Elsen and his experience working with Eide Bailly and an Agribusiness Finance Specialist.
The Importance of Maintaining and Understanding Your Financial Information
Having the right agribusiness financial advisors on your team can make all the difference to your agricultural operation and bring it to the next level. Gaining a good understanding of your financials, as well as the reporting requirements will help you become a better advocate for your farm. Plus, this information will allow you to make crucial business decisions with ease and running a successful operation.
Ready to take your agricultural operation to the next level?