Running your farm by the numbers is critical, especially as there are more moving pieces and activities going on in your operation. Farm leaders are looking for ways to manage their margins and make smart decisions about the farm’s finances.
It can be a good idea to take the pulse of your farm’s financial situation. You might do this with certain metrics you watch regularly to get an idea of how things are trending, and to anticipate any changes you need to make.
What financial measurements and metrics are you tracking on your farm? And most importantly, how are you using that information to make decisions as your operation moves into the future?
Whether that means checking your operation’s cash flow or setting up internal benchmarks as specific indicators for your operation, the metrics can shine a light to help you figure out what’s really going on.
The financials are the result
Here’s why. Your financial metrics are the results of your decisions and your activities in the operation. These results track where you’re choosing to invest your time and where the other people in the operation are investing their energy and efforts.
When you’re paying attention to your operation’s key metrics, you can more quickly make small changes or tweaks to make a bigger difference overall. That happens only when you’re able to act quickly and in an agile way, because you’ve been watching the metrics and keeping your eye on the ball.
Your financial measurements and metrics act are kind of like a rear-view mirror. The mirror shows you how your decisions are playing out for the overall operation. But first it’s important to make sure that you’re measuring the right things in the first place – and in the right way.
That could be a matter of working with a financial consultant to determine which metrics or ratios you will want to watch and track. It could mean taking a fresh look at the way you’re currently measuring your farm’s financial performance.
Maybe you investigate some areas where your farm can work to become more efficient, helping to better manage margins. (See this article on improving farm efficiency in our latest newsletter.) Or you see a new opportunity that makes sense for your operation – because you’ve re-envisioned the way you’re looking at the numbers.