Now is the time to review operating plans, investment plans and cash requirements for the upcoming year, says an Alberta Agriculture and Rural Development specialist.
“The need to develop a strong business plan has been never greater,” said Rick Dehod. “With grain prices flattening, margins have been squeezed. Being proactive allows your business to strategically plan and manage for the risks and uncertainty that are inherent in the business of farming.”
Step one is gathering new information, and update existing information, he said.
To assist in this annual review and planning process producers will need:
- Their completed 2014 income and expense statement. “Preferably this statement is completed on an accrued basis,” says Dehod. “You may want to compare this to previous years to see how the farm has progressed.”
- An up-to-date net worth statement or balance sheet. “All assets should be at current market value and all liabilities as up to date as possible. The balance sheet is a comprehensive listing of all your inventories and accounts receivable plus a comprehensive listing of all accounts payable, including all trade credit and farm business credit card debt is required.”
- A projected income and expense statement. “What is your projected net margin, and will it provide your business the funds to fulfil its current obligations and debt service? Stress test your projection. What if yields were five per cent less than your farm’s averages or prices less than projected? What if interest rates went up one, two or five per cent? Could you still meet your obligations?”
- A list of possible capital expenditures planned for the year, how much down payment will be required, over what amortization, and how this will affect the farm’s cash flow and repayment obligations.
These statements should be shared with your lender, partners, and advisers, said Dehod.