Farm Management Minute: 2015 brings opportunity for new goals
December 31, 2014
Hard to believe it is already upon us. Interesting, how when we were children the days seemed to drag by, and now, as adults, days seem to fly. Kind of like days of old when we listened to the dance music of Guy Lombardo on New Year's Eve and now people tune in to New Year's Rockin' Eve! Things have certainly changed.
There are a few things that have not changed as we get older. One thing that has not changed over time is the making of New Year's Resolutions. Resolutions are a type of goal setting that people use to get their life back on track or to accomplish something new. At the Center of Farm/Ranch Management, goal setting is something we ask producers to do so they know what they want to accomplish in the coming year. These goals should be a joint decision with all parties involved in the operation. All parties need to have input on where the operation is headed in the future.
Another item that does not change, for banks or the Farm/Ranch program, is the gathering of information for balance sheets. It is important to log inventories at the beginning of the year to compare with your balance sheet from the past year. Comparing these two years balance sheets indicates whether your farm has gained or lost farm net worth. A gain in net worth makes the bankers happy as money has been invested well and debt has possibly been reduced. If there is a loss in net worth, it is concerning to a banker as you may have incurred more debt in the past year or sold off assets to cover debt. The balance sheet alone will not tell whether money was made or lost, just if net worth has changed. To truly know what has happened on the operation, an analysis of all income, expenses, and operating ratios must be looked at.
If a producer is only using the records the bank requires to judge whether your farm is profitable or not, there is more that can be done. Some producers use their tax records as a way to judge if the farm is profitable; there is more that can be done. As a producer, if you are doing shoe box record keeping (all receipts and check statements go in a box until tax time), there is more that can be done. Records are the tools that can be used to help an operation become more profitable. With the coming of 2015 and setting new goals, maybe it is time to start using financial records as a tool for profitability.
If any producer would like more information on how the S.D. Center of Farm and Ranch Management can help your operation, call 1-800-684-1969, email firstname.lastname@example.org or check out our website at http://www.sdcfrm.com.