The University of Wisconsin-Madison Division of Extension Financial Management & Strategic Planning programs, information and resources intend to improve the farm financial and decision-making skills of Wisconsin agribusiness, farmers and farm managers, agricultural lenders and educators.
Farm Pulse
Information on how to use farm financials to explore farm business decisions. This course will help farmers evaluate their finances, take the pulse of their farm business, and set goals for the future of their operation.
The farm financial model helps the farmer make the best decisions for the farm business. From record-keeping to financial analysis, this model illustrates how to make sound financial decisions and identifies tools to help in the process. To understand the farm business’ records, one needs to understand the purpose records serve to and for the farm manager. The Farm Business Financial Model offers a process for informed decision-making.
The farmer must collect and organize income and expense receipts in an accounting system before generating financial statements. Receipt accounting is also referred to as record keeping.
Organizing the records provides the farmer with the financial information necessary to complete management reports, which are also known as financial statements. The Farm Financial Standards Council (FFSC) recommends farmers create four financial statements from which the financial position and performance may be analyzed. Financial statements should be prepared on a consistent basis. Statements include balance sheet, income statement, statement of cash flows, and statement of owner equity.
Understanding the farm business’s history of financial position and financial performance provides a basis for the farmer to make decisions and plan into the future. Pro forma refers to the future view of the farm’s financial position and performance. For example, what would the balance sheet look like after a future expansion? The future financial position can be analyzed for feasibility, profitability, and risk-ability. Pro forma financial statements complement the farm’s budgets. Cash, partial, and enterprise budgets are commonly used to assist the farmer in decision-making.
The first measure of financial position is liquidity. Liquidity is the ability of a farm business to meet the financial obligations as they come due – to generate enough cash to pay family living expenses and taxes and make debt payments on time. The two measures used to assess liquidity are current ratio and working […]
A farm business that has collected and organized their farm records will be able to complete management reports or financial statements. The Farm Financial Standards Council (FFSC – https://ffsc.org/) recommends farmers create four financial statements from which the financial position and performance may be analyzed. These statements include the balance sheet, income statement, statement of […]
Having financial statements (balance sheets and income statements) is a first step towards financial management decision-making. However, it is the next step that makes a difference in future profitability and that is analyzing the financial story being told by the financial statements and making decisions on where to spend management time to improve future profitability.
Dairy farmers have experienced strong prices this last year, though rising input costs may have tightened cash flows. Hopefully, dairy operations are entering this new year with a strong working capital position and have adequate liquid assets available in the short term.
The new year often brings thoughts of income taxes and tax preparation. Some farmers might have received a loan servicing assistance payment if they were experiencing certain types of financial distress.
Pick up any farm magazine or listen to any farm podcast and it won’t be long before the phrase “Costs of Production” comes up. Knowing costs of production is an important piece of management information and vital in many farm management decisions. Yet, as obvious as it sounds, pop open the hood and the messiness is revealed.
Join Kevin Bernhardt, Extension Farm Management Specialist, and Katie Wantoch, Extension Farm Management Outreach Specialist, as they share financial tools and analysis methods to aid in answering these questions and making informed decisions.
Whether it is marketing decisions, best production practices, human resource management or technology adoption, a major piece of information for the farm business decision-maker is knowing the costs of production. Two major questions in determining costs of production are how to calculate and which cost of production.
There are many tools farm managers can use to inform their decision-making. One simple and effective tool for many farm management applications is breakeven costs of production. This is particularly useful in marketing decisions as the breakeven cost of production is the price needed to cover costs. If a profit goal is added to the breakeven cost of production, then the decision-maker knows what price will not only cover costs, but also a profit goal.
Selecting the best recordkeeping tool will assist in making management decisions for the future. At the end of the year, farmers may be reviewing their income tax obligations and marketing plans or completing a business or enterprise analysis. A successful farm manager is already keeping good, accurate records throughout the year. Selecting the best recordkeeping […]
Many of us have spent numerous hours building the perfect plan, only to see it end up useless because our assumptions were wrong or some unforeseen disruption occurred in life. Thus, we conclude that planning is useless, a big waste of valuable management time. However, I think we are missing the point. Eisenhower said plans were useless, but the process of planning was indispensable.
Cyclical lows tend to be a time of greater anxiety for many and include increased exit from the industry. However, even in cyclical lows, some farms are making profits. For these farms, it is also a time of opportunity as capital asset prices for machinery, land, and cows are often lower as well. The question is: What do these successful farms look like at the end of cyclical highs that enable them to continue that success during cyclical lows?
Part II of this article series discusses how to clear obstacles that litter the path to implementing important decisions on the farm through the use of Fishbone Diagram and Forcefield Analysis.
Business strategies are practical actions that communicate how a business plans to reach its goals. Thinking strategically about the farm business as a whole helps determine emerging themes, issues, patterns, and opportunities. Learn how to complete a SWOT Analysis for your farm.
Part I of this article series introduces “The Memory Jogger” booklet and how brainstorming and nominal group technique can help generate your farm’s next great idea.
Host Katie Wantoch and Jerry Clark, Associate Professor and Agriculture Agent with Extension in Chippewa County, discuss the advantages and disadvantages of neighboring farmers buying forage equipment together.
Host Katie Wantoch and Ben Jenkins, Agriculture Extension educator in Green Lake County, discuss considerations for a farmer to consider with a future land purchase from his uncle.
Risk and farming are two sides of the same coin. Like many industries, the farm business lives with and deals with risk daily. Further, the number of risks and their costs are increasing. These increases make the management of risk a vital component for successful long-term profitability. Risk is the probability that some event will cause exposure to […]
