Many of us start thinking about ways to improve our fitness and health now that the New Year has begun. The usual advice from experts is to get moving. But when it comes to getting financially fit, sitting down might just be your best bet. At least, that’s the advice from independent financial consultant, Gary Sipiorski.
According to Sipiorski, producers need to begin the year by reviewing the year-end balance sheet and accrual-adjusted income statement to set the stage for 2025 planning. Steve Schwoerer, vice president of ag lending for dairy with Compeer Financial, concurs, adding that producers should also be looking at any capital needs for 2025 and prioritizing those needs versus wants.
“They should also have a handle on their 2025 crop input costs and see if they have enough money in the line of credit to pay for the costs,” Schwoerer says. “It is always a good time to look at their risk management plans for the year.”
Schwoerer says a common mistake that producers make is not accounting for all of their 2024 pre-paid expenses and showing them on their 12-31-24 balance sheet correctly.
Key Steps to Focus On
To put a solid financial business plan into action, Sipiorski suggests focusing on three to four major initiatives for 2024. These initiatives will serve as the bedrock of your financial plan. Here are some key components to consider when crafting your strategy:
1. Document the Plan
It’s essential for the plan to be documented. This involves thoughtful consideration and input from key players on the farm as well as advisors. Having a written plan ensures clarity and can help track progress effectively.
2. Prepare for Uncertainty
Uncertainty and volatility in the market can impact any business strategy. It’s important to build flexibility into your plan to accommodate these challenges and adjust as necessary.
3. Create a Comprehensive Business Plan
A business plan that ranges between 3 to 30 pages is essential. This document should thoroughly detail your strategies and expected outcomes, making it an indispensable tool for guiding your business forward.
4. Assign Responsibilities and Follow up
Clearly lay out who will be responsible for implementing parts of the plan and establish a timeline for progress follow-ups. This accountability helps ensure that the plan is executed effectively.
Sipiorski also emphasizes the importance of projecting cash flow based on the impact of your plans. This foresight allows producers to anticipate financial needs and adjust strategies, accordingly, ensuring that they are well-positioned for success in the coming year.
By taking these steps, producers can enhance their financial health the same way many of us strive to improve our physical health. Start by sitting down and reviewing your financials, then proceed with a robust plan to ensure a prosperous 2025.
