Sharpen your financial management acumen

An autonomous tractor/grain cart, controlled by a computer program, pulls alongside a combine that needs to be unloaded in a wheat field during a demonstration last month at AGCO Tech Day southeast of Salina, Kansas. The equipment is designed to fill labor shortages, save time and add to the bottom lines of farmers. (Photo by Tim Unruh.)
Maxson Irsik
Maxson Irsik

The more you know, the better you can maximize the profitability of your farm or ranch

Results of a recent Pinion survey show that building financial management acumen is high on the list for farmers and ranchers.

That only makes sense. With today’s thin profit margins, it doesn’t take much to slip into the red if you aren’t staying on top of planning, budgeting and other financial information. The more you know about financial management, the better you can maximize the profitability of your farm or ranch.

Moreover, understanding your finances allows you to benchmark your financial performance over time to gain clearer insights and a competitive advantage. On top of that, lenders, government agencies and other external sources increasingly require financial documents from you—another reason to bolster your knowledge of farm financials.

Here are a few tips to help you sharpen your financial perspective. Many of these resources are free.

1. Utilize local resources. University outreach tools and education are a great place to learn more about financial management. Some examples: · Kansas State University [https://www.agmanager.info/] – From the university’s Department of Agricultural Economics, this site is a comprehensive source of information, analysis and decision-making tools for agricultural producers, agribusinesses and others. · University of Nebraska-Lincoln [https://cap.unl.edu/] – The school’s Center for Agricultural Profitability offers a wealth of information to help agricultural producers manage production costs and make informed financial decisions. Its “Nebraska Crop Budgets 2025” publication [https://cap.unl.edu/cropbudgets/] provides detailed production cost estimates for 83 different crop budgets, including alfalfa, corn, soybeans, wheat and many others. · Iowa State University [https://www.extension.iastate.edu/agdm/] – The university’s Extension and outreach service covers the gamut of farm and agribusiness management. Its “Farm Financial Planning Program” [https://www.extension.iastate.edu/farmanalysis/] consists of one-on-one financial counseling, a computerized analysis of the farm business and referral to other Extension programs or outside services that may be useful.

2. Attend industry meetings. The National Cattlemen’s Beef Association and the National Corn Growers Association are among those offering financial management and marketing resources as part of their meetings. Both also assist ag producers with robust articles, podcasts and presentations on their websites. The annual Commodity Classic [https://commodityclassic.com/] is another farmer-focused event with educational sessions designed to help row-crop farmers improve their efficiency and profitability. This year’s Commodity Classic will be held March 2 to 4 in Denver.

3. Make use of your Certified Public Accountant. Don’t be shy about asking your CPA your financial questions. I enjoy responding to clients’ questions and helping them think through issues related to taxes, auditing, finance or operational strategies.

4. Attend a class through an online program or university. Busy farmers and ranchers can learn at their own pace with online courses. Here are examples: · Kansas State University’s Agricultural Economics Department – Its “Finances and the Farm” online course [https://ksre.k-state.edu/tuesday/announcement/?id=101373] is designed to help producers develop strong financial skills to make informed decisions that impact their farm’s bottom line. The course is self-paced, which means participants can take up to six months to complete the material, although it’s recommended that participants make a schedule to complete it in two to four weeks. The cost is $100. · University of Wisconsin-Madison Extension Farm Management Program [https://farms.extension.wisc.edu/self-paced-online-farm-financial-course/] – The university’s “Farm Pulse: Financial Management and Analysis” [https://farms.extension.wisc.edu/programs/farm-pulse/#overview] is a self-paced online course for conventional and organic farmers interested in learning how to use farm financials to explore their farm business decisions. The eight-module course helps farmers evaluate their finances, take the pulse of their farm business and set goals for the future of their operation.

5. Make use of ag-specific resources. In addition to peer groups, these include: · The Farm Financial Standards Council [https://ffsc.org/], which focuses on supporting farmers through standardized financial reporting and analysis across the agriculture industry. Its mission is to serve as the go-to resource for financial guidelines that enhance farm operations. · Sandhills Task Force [https://www.sandhillstaskforce.org/], which aims to enhance grassland ecosystems while sustaining profitable ranching.

Explore these suggestions. As you learn more about financial management, you might learn how to access financial resources, prepare reports or perform financial analyses for your ag operation. You’ll bolster your knowledge of financial terms and guidelines. You’ll likely improve how you solve problems. With that knowledge, you’ll take giant steps toward more informed decisions and increased profitability.

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, Irsik 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].