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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.
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.
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.
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.
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.
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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.