9 ways to strengthen your farm business for 2024
Part of being a farmer in the 21st century has nothing to do with the outdoor demands of your crops and cattle.
So much of the business of farm management today takes place on the inside—cash flow, pricing contracts, invoices, loans, employee records, and regulatory compliance. They may not be your first love, but they’re key to ensuring the success of your operation.
Over the coming weeks, spend some time reviewing the “indoor” components of your ag operation. Here are my recommendations for tasks that can assure a more productive year ahead:
1. Calculate your cash position at year’s end. Determine how much cash you have in the bank as well as what your loan balances are. This will tell you how much income, at a minimum, you’ll need to generate over the next year to meet your obligations.
2. Evaluate your assets. Document what you have at your farm, dairy or ranch. Make note of your livestock numbers and feed amount and what they’re worth. Take stock of your crops, land and equipment and whether their value has increased or decreased. Track your year’s progress as well as your marketing plan for the coming year. In addition, assess your personal holdings, including your home, certificates of deposit and retirement accounts. All this helps tell you what progress you’ve made over the last year.
3. Review your Farm Service Agency Farm Operating Plan. Make sure your farm operations match what you reported on your 902 form, or Farm Operating Plan. The six-page 902 form is used to establish eligibility for farm program payments, participation in certain Natural Resources Conservation Service programs and other U.S. Department of Agriculture benefits. This is the time of year when Farm Service Agency begins sending out audit notices to randomly selected farms. If FSA determines that your 902 form isn’t correct, you have to give back any program money you received, and you might be ineligible for future program participation. Is your’s current and accurate?
4. Think smart business decision first, tax benefit second. Don’t be tempted to buy a piece of equipment you really don’t need just to get a tax deduction. Likewise, be careful about locking in a high price for feed in case a market drop later leaves you with an over-valued purchase. Avoid paying cash for expenses you won’t be able to deduct from your taxes. You don’t want to end up with new equipment, supplies or other purchases only to see next year’s income fall below expectations.
5. Choose multiple payment contracts if you want to defer income until next year. These provide more flexibility than a single contract. For example, you and your buyer have set the price and delivery date for your commodity or cattle. Don’t lock in that sale with one big deferred-payment contract. Instead, set up several smaller agreements for more flexibility in reporting the amount of income you’re deferring.
6. Touch base with your professional advisors. Talk with your financial consultant, accountant, lender, insurance agent and investment advisor. Make sure your accounts, policies and tax strategies are adequate and up to date. Your insurance agent, for example, can tell you whether you should increase your deductible for health insurance coverage or consider a policy for long-term care. Meet with a land appraiser to help you decide whether you should buy or sell land. It’s also a good time to review your farm’s technology needs. Talk with a computer expert about bolstering your office and operational efficiencies. Update your website or social media page—or create one if you don’t already have an online presence.
7. Review your labor force offerings. Take a closer look at compensation and benefits. Are they on par with the rest of the industry? Do you have the right mix of personnel? Do you need more—or fewer—employees? Do your employees receive adequate training? This is also a good time to personally thank your employees. A personal word of appreciation can go a long way toward inspiring your staff for next year’s performance.
8. Establish your goals for next year. Think about what you want your farm or ag business to achieve. Do you want to increase production or herd size? Change your crop mix? Leave money in the business or take it out? What’s working and what’s not? Planning like this forces you to look at where you are and what you need to be doing to improve your performance. It’s important, too, to set a timeline to keep your strategic steps on track.
9. Invest in yourself. As a business owner or manager, you need to be at the top of your game. Your farm, employees, customers and family members count on you to steer the operation through challenges and opportunities. Make time to set new personal development strategies. Read books on personal growth and leadership skills. Attend an industry conference. Join a worthwhile organization. Network. Join a peer advisory group. Make time for regular exercise and recreation. You owe it to your business, employees, family—and yourself.
Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies or protect the current owners’ legacy through careful structuring and estate planning, Max applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].
