TJ Wilson is the Director of Finance Sales at FBN®. Based in Hiawatha, Kansas, TJ has 17 years in Ag lending and management. He is actively involved in the day-to-day management of a corn and soybean operation. Click here to learn more about TJ and other members of the FBN Finance Team.
Better Manage Your Financial Position with These 3 Steps
Feb 16, 2023
As you look ahead at the future of your ag operation, it’s worth setting aside time to assess your finances to ensure you’re setting yourself up for success moving forward. Here are three steps you should consider taking as a farmer to effectively manage your financial position. 1. Setting Goals Before you can really sit down to review your finances and make adjustments, first think about where you want to end up. Are you trying to eliminate debt? Are you trying to build working capital to buy a farm? Establishing those goals will allow you to look at your finances through a different lens to better understand how you can get to your end goals. 2. Reviewing Your Balance Sheet As a producer, you should sit down with a trusted advisor to review your current financial position. This should be a review of both the asset and the debt sides of your balance sheet. This review should go into detail of making sure the rates and terms of your loans are lined up with your goals. Ask yourself: Is your working capital position where you want it to be? How is your equipment line? Do you need to make some capital expenditures in the next couple of years? Answering these kinds of questions during this review process will provide you with a good overall understanding of your position and what you can potentially do to improve it. 3. Assessing Cash Flow and Cost of Production Cash flow is the key to any operation remaining viable (and successful!) long term. Taking time to review your cash flow is imperative to determine how the next year could position you both positively and negatively. You should also consider your cost of production as part of this assessment. With increased volatility in both commodity prices and input prices in recent years, doing a thorough analysis on your input prices and how those factor into your overall cash flow will improve decision making during the year. Financial Solutions from FBN ® Finance There are obviously a number of other factors that come into play when managing your operation, but these three key factors should be done consistently to provide better insight into your operation and allow for better positioning long term. Interested in taking the next step with your ag operation? FBN Finance has a wide range of available financing options to help you build a stronger financial future. Connect with an FBN financial advisor today by clicking here , completing the form below, or calling 866-619-3080. Copyright © 2014 - 2023 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, “Farmers Business Network”, “FBN” are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc. The material provided is for information purposes only. It is not intended to be a substitute for specific legal, accounting, or professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.
5 Financial Considerations Farmers Should Focus On Right Now
Nov 10, 2022
As we approach the end of 2022 and look ahead to the upcoming 2023 season, now is the time to keep a few key financial considerations in mind. 1. 2023 Crop Year Planning It’s never too early to start reviewing projected cash flows for the next crop year and making financial plans around those expectations. Strategizing your plan for the next year will enable you to start working proactively on a number of other financial actions on this list and be more prepared as you work on each of those items. Getting your plan together early will also help you plan your future input purchases , implement hedging strategies, and understand how much working capital you will need for the upcoming season. [STRATEGIZE: Get greater control of your crop input plan with the new FBN® Acre Pack online crop planning tool.] 2. Operating Loan Renewals & Interest Rates Operating line renewals are just around the corner. In the current volatile environment, producers should be proactive in securing their lines of credit earlier. Input prices are still elevated and the need for a larger line of credit is very real this year, especially with the potential timing of purchases. As producers renew and/or expand their operating lines, they should also keep a close eye on their interest rate and the structure of that rate. The Federal Reserve is anticipated to implement additional interest rate increases by the end of the year . This will have a direct impact on the borrowing rates of operating lines, so producers should consider getting rates locked in now. When working on your line of credit for the upcoming year, having your crop plan already put together will facilitate that process to ensure you get the borrowing capacity and flexibility you need from the start. [LEARN MORE: Apply online to get your FBN approval decision instantly, with rates starting at 5.78%] 3. Evaluating Working Capital Needs and Risk Management Plans Reviewing your working capital position is a constant on an operation. Cash is always king. As we approach year’s end, it is important to know your working capital needs for the remainder of the year and going into the spring. Understanding your working capital needs and position allows you to make better informed decisions regarding input purchases and commodity sales. Working capital also plays a key role in the evaluation and implementation of a risk management plan for the coming year. Depending on the risk management strategy you use, it can cause a strain on working capital. By this time, you have likely done your crop plan for the next year and have a good understanding of what your input costs will be if you haven’t already locked them in. Now it is time to figure out how you will protect your investment. Understanding your cost of production will allow you to start making decisions around implementing your risk management plan. [WATCH: Working Capital and Farm Risk Management] 4. Locking in Input Supply Last year, we saw major challenges with the supply chain and producers being able to get their hands on supply. Being proactive and locking in supply early this year will be very important. This applies not only to locking in prices, but also to securing deliveries and taking possession of products while they are readily available. Suppliers are also looking to lock in their supply this year, so working with them early will help in securing both a competitive price and the ability to guarantee a supply. [LISTEN: Special FBN® Podcast: The State of the Global Supply Chain in 2021] 5. Tax Planning With commodity prices at their current levels this year, many producers will want to be more proactive in their year end tax planning . Does it make sense to prepay input, defer income, make improvements, or upgrade equipment, for example? Because every operation is different, it’s important to work with your accountant to plan for your operation’s unique situation. It is never too early to start having these conversations with your accountant and planning ahead. [ READ: It’s Tax Season. Here Are 5 Ways Farmers Can Get Ready. ] Copyright © 2014 - 2022 Farmer's Business Network, Inc. All rights Reserved. The sprout logo and “FBN” are trademarks or registered trademarks of Farmer's Business Network, Inc. Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.