Jul 25, 2016 by Lee Hart

Important “summer thinking” ahead

In perhaps what is a window between field spraying and harvest it may be a good time to think about the overall business/financial planning sides of the farm operation, says consultant Art Lange.

Lange, a long-time Alberta Agriculture specialist who has been consulting for a dozen years, says there are some key questions producers

Art Lange...ask yourself a few questions.

Art Lange…ask yourself a few questions.

should be asking as they look at the farm business they have today and where it is headed.

They are not real any surprises in the questions, but Lange says they are often overlooked and without some thought can lead to some of the most common farm management problems down the road.

Here are the points to ponder this summer:

  • At least once a year after you have your financial statement or income tax return, sit down and analyze the income and expense parts of your operation and compare them to the results from at least two prior years. Is your operation moving in the direction you would like it to? If not, what adjustments can you make to move it closer to your ideal operation?
  • As margins get tighter, do some cash flow projections for the upcoming year. Will you have cash when you need it to make loan payments, crop input payments or for other major expenditures? (ie. synchronize major sales and expenditures and/or make sure that you can stay within your operating loan limit or trade credit limit)
  • With machinery and land prices rising rapidly, be careful about major new purchases. Just because a quarter section (or two or three) next to yours is coming up for sale doesn’t mean that you should buy it. First do some calculations to determine if you can comfortably handle the extra payments on top of your existing debt load. Then ask yourself (and the rest of your family and/or management group) “does this purchase really fit into our long-range plans or is it just a “nice to have” item” so you can “show off” to the neighborhood?” Be especially careful about new machinery purchases as those are rapidly depreciating assets.

“There is nothing unique or startling about any of this”, says Lange. “They are the basic principles of good farm business management that need to be constantly revisited.”

Lange is the principle of AJL Consulting based in Sherwood Park, AB. He has served as a farm financial consultant for the Canadian Farm Business Advisory Service (CFBAS) which was administered by Agriculture and Agri-Food Canada. During a five year term with that program he worked with producers to complete about 100 farm business plans. Since 2009 he has been concentrating on developing business plans for food processors and preparing farm succession plans.

You can reach him at AJL Consulting, phone: 780-467-6040, or by email at [email protected] or visit his website at ajlconsulting.ca

Lee Hart is a field editor with Grainews based in Calgary. Contact him at 403-592-1964 or by email at [email protected]

 

 

Lee Hart

Lee Hart


Lee Hart is a long-time farm writer, and honorary member of the Alberta Institute of Agrologists, with many observations on the agriculture industry, who never hesitates to admit he is wrong (should that ever happen.)


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