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Tying Up Loose Ends

Thank you to Dr. Alex White, Professor, Virginia Tech Dairy Science, for writing this week's article!  Dr. White can be reached at

As New Year’s Day approaches, hopefully you are facing a slow-down in your typical hectic work schedule on the farm.  There’s not as much work to do with your crops; you’re probably between breeding and calving/lambing seasons; and, okay, you dairy farmers just keep on keeping on.  Bless all of you for providing the rest of us with food, fiber, energy, and entertainment!

While there’s no argument that you deserve a break this time of year, I would like to give you a few pieces of advice that will make your life easier (and hopefully better) in the upcoming year: 

Clean up Some Loose Ends: Your records are an important tool in figuring your income taxes, preparing for loan renewals or applications, and in planning for the upcoming year.  Take a few moments to think about ways you can improve your record keeping system.  I recommend working with an accountant who understands agriculture to make sure that your record system is accurate and will allow you to get enterprise-level records - this is a must-do in my opinion.  It will help you see which parts of your operation are earning profits and which parts are losing money; it will also help you calculate more accurate breakeven prices and costs of production for each aspect of your farm/business. 

A few other “loose ends” that you should take time to clean up include:  update/revise the beneficiaries you have listed on your insurance policies & retirement accounts; update the level of coverage on your auto insurance, homeowners insurance, and liability insurance policies; and finalize your year-end balance sheet. These things are easy to overlook or “put off until later” – but they are very important when it comes to protecting your family and your business should something happen.  The year-end balance sheet will come in extremely handy for your upcoming loan renewals; it will also give you the critical information you need to make the accrual adjustments to your income statement. 


Goals for the New Year:  Effective managers set goals and prioritize their actions.  Now is a great time to clarify your goals for the upcoming year(s).  Some ways to do this are to: continue building your business plan for your operation (check out Farm Credit’s Ag Biz Planner program!); build a cash flow statement for the upcoming year; develop goals for your personal life and family life, as well as your business.  Your business plan will help you see how each aspect of your farm/business is inter-related.  It will also help you identify potential improvements to your business.  One of the best tools for building your business plan, aligning your personal-family-business goals, and planning your operation for the next year is a cash flow statement.  It shows you where your money is coming/going, when it is coming/going, how much of an operating loan you might need, when to schedule new loan payments, seeing if you can afford your family lifestyle….  In my opinion, every manager should build a cash flow statement for the upcoming year!!  (email me for an Excel spreadsheet version of my cash flow statement – personal and family goals are just as important as your business goals.  Life is not about having the best business or making the most profit; it’s about living the life that you want- and that includes your mental, physical, and spiritual well-being! 

Protect Yourself Against Financial Perils:  Let’s face it, your family and your business can be adversely impacted by a death or disability in family, or by the retirement or loss of key personnel.  It can also be hammered by identity theft and/or legal proceedings in today’s “sue now, ask questions later” society.  Here are a few tips for you:
  • check your credit history and your credit score on a regular basis.  This will help protect you against identity theft.  It will also help you see your financial position through the eyes of a lender.  And no, checking your credit history or credit score yourself will NOT impact your credit score.  Shoot for a credit score above 700 (on a scale of 300-850).
  • update your estate planning documents: your will, power of attorney (POA), and your advance medical directive (AMD).  You might also talk with an attorney about other estate planning tools such as a gifting strategy, the use of trusts, or the use of life insurance to achieve your goals.
  • start talking about your transition plans for the farm/business with your family members.  We usually put off this conversation until it is too late.  If the well-being of your family is important to you, start this conversation now and keep it going!!
  • have a business meeting with your partners and key personnel.  This is an opportunity to talk about your goals and to make sure that everyone is on the same page.  It also is important in maintaining any liability protection that you might have if you are a corporation or an LLC.  Take time to discuss the “business side” of your farm/business!

Well, there you have it – a few items to put on your to-do list for year-end.  Let’s face it, now is the best time to do these things because you won’t want to do them once “the busy season” kicks in!  Take time at year-end to plan for the future of your business, and more importantly, the future of your family.  On that note, I wish you and your families and your communities a very happy, peaceful holiday season and a healthy, profitable new year!

Monday, December 10, 2018
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