How to Evaluate Your Midyear Farm Financial Progress

It’s hard to believe that we are already halfway through the year. Now is the perfect time to conduct a midyear farm financial check-up! Reflecting and planning might not be your favorite business management tasks on the farm, but an annual midyear check-in with your industry resource team is a strategy you should consider.

Here are ten ways to implement a midyear financial checkpoint:

1. Evaluate Your Best Use of Debt Dollars. 

Take time to review your existing loans and make sure you are aware of what interest rates you are paying on each of them.  It is a good idea to check this biannually and to be in contact with your loan officer to discuss your financing options. 

For instance, if you utilize a credit card with a high interest rate to cover short-term expenditures like crop and fertilizer purchases, feed bills or to pay for machinery repairs and parts, it might be time to call your lender and ask about setting up a lower interest rate line of credit to cover your farm’s operating needs.

Reviewing your intermediate (vehicle and equipment) and long-term (home/farm mortgage) debts are also important.You may have the opportunity to lower your rates and/or decrease your loan terms, which will save you interest money over the long haul.  Does it make sense to prioritize paying down a high interest rate loan or double up on a credit card payment? Work with your loan officer to identify and evaluate each source of debt and determine the best debt dollar use strategy for your operation. 

2. Review Your Revolving Line of Credit.

Farmers often utilize a line of credit as a tool to help manage their annual operating costs.  Lenders encourage you to use credit lines for appropriate short-term expenses. Prior to using your line of credit for a major farm improvement, piece of equipment or something that qualifies for longer  term financing, contact your loan officer to talk about financing options. We recommend making sure you are using your line of credit in the most effective manner possible.  Fully revolving the line of credit on an annual basis is a requirement of renewing your credit line, so monitoring its use and repayment biannually is essential.

3. Connect with Your Accountant and Financial Advisor to review your income and expenditures. 

How do they compare to the same time frame as last year?  Input costs are definitely on the rise this year and for many farmers, income has increased too as the result of special program payments, grant funds and the increase in many commodity prices.  If you find yourself with additional income, it might be the right time to start or adjust a retirement savings plan.  Connect with your financial advisor to discuss your options and review the status of your current investments.  It is never too early to start talking with your accountant about year-end tax planning or if the status of your tax bracket might change.  One of the biggest mistakes we see is waiting until the last minute to map out a plan by overlooking early year-end tax planning.  Consulting with both a reliable accountant and financial advisor will certainly help to support your future success. 

4. Evaluate Your Insurance Coverages.

While no one likes to plan for unfortunate accidents or weather related catastrophes, they do occur and mitigating those risks are key to minimizing their effects on your bottom line.  Talk to your insurance agent about any recent farm improvements or equipment purchases you have made and make sure those upgrades and/or purchases are reflected in your current policy.  Likewise, if you have recently sold or traded equipment, make sure those changes are noted on your policy.  If you allow the public onto your farm property for agritainment purposes or to purchase produce and products from your farm, please review your liability coverage with your insurance agent. It is also a good time to check in with your crop insurance agent to make sure you have met your acreage reporting requirements and to see if there are any new insurance products or programs available that might benefit your operation.  If you own land or have a family, investing in life insurance is another important consideration.  No one likes to talk about a world without you in it, but it is a necessary conversation and planning for the inevitable now will help to ensure your family’s and farm’s future success. 

5. Revisit Your Will.

Do you have a will? If you have not created one, we highly recommend prioritizing this on your to-do list. If you do have a will, when was the last time you reviewed and updated it? Did your family unit grow, your business restructure, or did you purchase additional assets? We recommend keeping your will updated and in a secure location to help your family be better prepared for the future.

6. Analyze Your Business Plan.

We highly recommend each operation have a business plan and to check in on the progress of the plan from an implementation standpoint. Are you making progress? Do you need to adjust your goals? Are there new opportunities? It is a good idea to write down your goals and revisit them throughout the year.

7. Evaluate Your Marketing Plan.

As marketing opportunities change daily, it is important to check on your total farm marketing strategy and take advantage of opportunity when you can. Do you check the markets regularly and are you able to take advantage of opportunities when commodity prices are up? Are you strategically evaluating what is working in your plan and adjusting what is not working to help ensure year-end profitability? These are all great questions to ask yourself as you progress through the remaining part of the year. Ultimately, having a solid plan and executing your marketing strategy will help you to overcome market volatility and uncertainty.

8. Examine Your Cash Reserves.

Have you needed to dip into your emergency fund recently? Do you have three to six months’ worth of living expenses set a side in an emergency fund? Not only is this a good financial best management practice, but it can also help to give you peace of mind and prepare you for the unknown.

9. Revisit Your Annual Budget.

We recommend looking over your income and expenses. Evaluate if you need to adjust and make changes due to income losses or an increase in expenses. Being financially aware of your budget will help you to make quality business decisions.

10. Check in with your Loan Officer.

Everyone has experienced a challenging year and open communication with your loan officer is mutually beneficial to both you and lender. Lenders look forward to discussing your future plans or any changes you may have made to your business plan or budget. Our main goal is for you and your operation to be successful.

We hope this list gives you an idea of what you should be thinking about during your midyear farm financial check-in and will help you to plan. If you want some help from a loan officer, give us a call at 888.339.3334.