The Agricultural Business Analyzer is a set of Excel spreadsheets designed for a farm business. It helps producers prepare the three key financial documents: a balance sheet (that measures net worth), income/expense statement (or profit/loss statement), and cash flow statement (that measures changes in a business’s financial position).

“The understanding, analysis and interpretation of these financial statements is important for good farm decision-making,” said provincial farm financial specialist Rick Dehod. “The program can help analyze the financial strength of a farm business and provide producers with the information to make informed decisions.”

To help producers use the online tool, there is also a video tutorial, frequently asked questions, and Excel program user tips. The tool can be found at agriculture.alberta.ca.

Using the tool, producers can review up to five years of historical financial data and prepare and analyze a financial plan for the upcoming year. Projections start with an opening net worth statement, and then information on past and projected income and expenses for the coming year can be entered into the program and analyzed. Incomes and expenses for the upcoming year, along with expected monthly cash flows from operations, capital investments, financing and other farm cash flow activities are then entered into the program.

“In addition, the program calculates key ratios in the areas of liquidity, solvency, profitability and efficiency for both the past and projected income and financial statements, and compares them to industry benchmarks,” said Dehod.

Provincial officials are also holding two information sessions on using the analyzer in Leduc on Feb. 17 and Airdrie on Feb. 18. Both sessions run from 1 to 3:30 p.m. To register, call 1-800-387-6030.

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The online tool is free and powerful, said farm financial specialist Rick Dehod.

“The program can help analyze the financial strength of a farm business and provide producers with the information to make informed decisions,” said Dehod.

Statements produced by the analyzer can even be submitted to financial institutions for loan applications or annual reporting, he added.

Using the analyzer, farm business managers can review up to five years of historical financial data, and prepare and analyze a financial plan for the upcoming year. Projections start with an opening net worth statement, and then information on past and projected income and expenses (forward for one year) can be entered into the program and analyzed. Incomes and expenses for the upcoming year, along with expected monthly cash flows from operations, capital investments, financing, and other farm cash flow activities are then entered into the program.

This creates a closing financial statement illustrating what the financial situation of the farming operation will be at the end of one year based on its projections, said Dehod.

“In addition, the program calculates key ratios in the areas of liquidity, solvency, profitability and efficiency for both the past and projected income and financial statements, and compares them to industry benchmarks,” he said.

The program also highlights financial areas that may be weak or risky.

“Farm business managers can also assess the financial impact of their business decisions (such as purchasing more land, machinery, renting more land, and taking on more debt) on their businesses going forward into the future.”

The new version of the analyzer is compatible with current Windows operating systems and latest version of Microsoft Excel 2013.

To view the analyzer, go to agriculture.alberta.ca.

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The Agricultural Business Analyzer (ABA) Simple Farm Ratio Analyzer gives users a quick idea of the financial health of their farm or ranch as well as a comparison of their business’s ratios to industry benchmarks, said farm finance specialist Rick Dehod.

“The ABA Simple Farm Ratio Analyzer is a shortcut Excel program that takes just eight key financial entries and calculates financial ratios for the farm/ranch and colour codes them in comparison to industry benchmarks,” said Dehod.

“These eight key financial numbers can be taken from your accountant-prepared financial statements for the past year and entered into the various open cells in the one-page spreadsheet.”

The eight key numbers are: farm gross revenue, farm gross expenses, depreciation, debt servicing payments, current assets, long-term assets, current debt and long-term debt.

“With these eight quick entries you will know how your farm is doing financially,” said Dehod. “You can then consult with your accountant or an agricultural finance specialist to come up with plans to mitigate and improve those areas where your financial ratios are weak.”

Using your net worth statement for the beginning of 2015, you can do your income and expense projection, sources and uses of funds (cash flow) for the year, and project your closing net worth statement for 2015, said Dehod.

“Once you have your projected 2015 closing net worth statement, you can generate the year-end financial ratios, and compare them to the ratios you generated from your beginning net worth statement,” he said. “This will give an indication if your 2015 operating plan will progress the financial viability and health of your farming operation.

“It all seems like a lot of work, but it will help you create an awareness that can help you make better decisions to increase the viability and success of your farm business.”

To find the analyzer, go to the Alberta Agriculture and Rural Development website. Rick Dehod can be reached at 780-427-4466.

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“With this current information in hand, it is a good time to look at your farm’s business financial health and how it compares to your opening net worth statement for 2013. This comparison will give you great insight on how your business has performed and what parts of your business may need some attention. Using your own information will provide ratios that you can compare to previous years and also to industry benchmarks.”

To help producers be aware of the ratios for their farm businesses, Alberta Agriculture and Rural Development has a decision-making tool called the Agricultural Business Analyzer (ABA) Simple Farm Ratio Analyzer.

ABA is a shortcut Excel program that takes just eight key financial entries and calculates 11 financial ratios for the farm/ranch and colour codes them in comparison to industry benchmarks. These 11 ratios give producers a quick idea of the financial status of their farm or ranch and a comparison of the business’s ratios to industry benchmarks.

“The eight key financial numbers can be taken from your accountant-prepared financial statements for the past year and can be entered into the various open cells in the one-page spreadsheet,” says Dehod. “It is very important to note that you should be using accrued revenue and expense information and assets at fair market value to enter into these spaces.”

Eight entries

The eight entries to make are farm gross revenue; farm gross expenses; depreciation; debt servicing payments; current assets; long-term assets; current debt and long-term debt. Long-term assets and debts include intermediate assets and debts in these entries.

“With these eight quick entries from your accountant’s review engagement report, or accrued notice to reader report for the previous fiscal year, you will know how your farm is doing financially,” says Dehod. “It will also tell you where your farm is strong and where it is weak. You can then consult with your accountant or an agricultural finance specialist to come up with plans to mitigate and improve those areas where your financial ratios are weak.

“Having your net worth statement for the beginning of 2014, you can do your income and expense projection, sources and uses of funds (cash flow) for the year and project your closing net worth statement for 2014,” says Dehod.

“Once you have your projected 2014 closing net worth statement, you can generate the year-end financial ratios, and compare them to the ratios you generated from your beginning net worth statement. This will give an indication of whether or not your 2014 operating plan will progress the financial viability and health of your farming operation.”

It may seem like a lot of work; however, using this decision-making tool will help producers create an awareness that helps them make better decisions to increase the viability and success of their farm business.

The ABA Simple Farm Ratio Analyzer can be downloaded from the AARD website. Farmers with questions or problems with the program can contact Ron Lyons, manager of Business Commercialization, at 780-980-4363.

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