As you get ready to meet with your lenders, you'll want to prepare yourself with as much up-to-date financial information as possible. That way, you'll be ready to accurately and confidently present your operation and field any questions about your financial information and plans.
You'll need up-to-date historical financial information, like your balance sheet, as well as forward-looking projections. Where does all of that information draw from? Your farm's bookkeeping records.
Plan to keep up
Pulling together this major financial information together can be time-consuming, but there might be something even trickier: keeping the books up-to-date during the busier seasons on the farm.
At harvest time, everyone on the farm is focused on one thing – getting the crop in at the right time, in a timely manner, for the best possible quality.
That production work is critical and must get done. Everyone is focused on harvest, and because it's the main priority, other things may be paused as you determine what needs to get done each day. Bank statements and other information to complete the books could start to pile up as you focus on harvest priorities.
But this can become an issue when it comes to the accuracy of your books and ultimately, in the financial information you're presenting to your banker and others. As time passes, it can be tougher to remember exactly how each expense should be recorded.
Get ahead of the game
You could end up having to scramble to put together all the information, which could involve months' worth of bank statements and loan statements, in time to meet with your lender. It will be critical to have created a clear plan with all of the information necessary for this year's meetings to run smoothly.
You'll likely want to assign responsibility for the books to someone in your operation who will be well-suited for that job, or find someone from outside of your farm to keep the books current for you.
Here are a few tips:
• Create a bookkeeping process that includes complete weekly updates of your accounting information
• Use accounting software that's best suited to your operation's needs
• Set up a chart of accounts specific to your operation – and apply them consistently
• Review your up-to-date information as you make financial decisions
How does your operation do when it comes to maintaining accurate farm financial records? Is it tough for your employees to keep the accounting information up-to-date during busy farm seasons like harvest? How confident are you in the forward-looking projections and historical financial information you're presenting to your lenders?
Find more business ideas for your farm – including tips to prepare for lender meetings – in the new issue of Water Street Solutions' quarterly publication, Smart Series.
The opinions of Darren Frye are not necessarily those of Farm Futures or the Penton Farm Progress Group.