Chances are that your operation is pretty busy in the field
right now. As the weather moves quickly, it’s so important to take advantage of
the best possible windows for fieldwork. But the outside financial world of
agriculture also continues to change rapidly, regardless of the season.
Maybe you have employees so you’re not as involved in the
fieldwork itself — now you manage the overall process. Good financial management
processes and decision-making will be critical as you gain more information
about where your crop year will end up.
This is especially important to think about if you’re the
head of your farming operation. You’re making a lot of decisions every day. They
range from very small to those with a larger impact.
The decisions with the biggest impact are the ones setting
the overall direction for the operation. These often require a great deal of
thought and reflection beforehand: about what you want for your operation, for
your farming career and for other family members involved in the
It can be tough to make these decisions, though, if you
don’t have the right data and information about your operation. It all starts
with measuring the right things — setting up metrics for your operation — and
then tracking them over time so you can better understand what’s going on and
can start to make changes based on what you’re finding out.
I think getting the right metrics in place for your farm can
help you answer a big question: How do I know? How do I know that is so?
Asking yourself this question leads you to make decisions
that are backed by good data and information. Developing your answer gives you
the opportunity to build a business case for what you’re considering, as you
take a look at your assumptions.
Here are a couple major areas where tracking the right
metrics and examining your assumptions can help you make decisions:
* How many acres should I farm? How large should my herd be? This question
looms large in the mind of any growth-oriented farm leader, and the answer will
be different for each operation. Your answer allows you to set farm goals and
milestones for the future.
On the other hand, if you want to retire in a certain number
of years, you may need to create an estate plan to address the size of your
operation. It all depends on where the farm is headed;
* How much equipment do I need and what size should it be? Answers here will
be connected to your answer to the previous question.
Get insight from financial metrics around how much you’re
spending on equipment per acre that you’re farming. You can start to get an idea
of what you really require and where you might be able to make changes, if
* Where should I be spending the majority of my time? In general, the more
acres you farm, the less time you should be spending in the tractor and devoting
more time to the management of your operation. Also, the closer you are to
retiring or transitioning the farm, the more you will want to work on building
the skills of the next generation.
Another way to think about this is: Where do I bring the
most value to the operation? That is likely where you need to be spending the
majority of your time.
You can hire others to handle aspects where you feel you
don’t bring as much to the table. Then you are freed up to focus on areas where
you bring high value.
Ask these questions and get the metrics and information you
need to drive your decision-making. If you could use some help developing
metrics for your farm, consider working with a financial consultant to get the
data you need.
Getting the right metrics about your operation helps you
answer these overarching questions for your operation.
During busy times, it’s human nature to focus on what’s
urgent and important — planting and growing the best crop possible. But it’s
also important to continue managing the financials and decisions in your
operation as the crop year shapes up.
In a year when margins could be tight for many farmers, the
best farm financial managers will stand out as the cream of the crop. How will
you plan to keep the strategic management of your farm a priority, especially in
the upcoming busy months?