10 Tips From Your Banker

November 19, 2015 04:18 PM
10 Tips From Your Banker

Budget wisely and keep good records for 2016

Tough times expected ahead? The American Bankers Association (ABA) shares 10 strategies listed in the box below.  

“Falling commodity prices, a stronger dollar and a probable increase in interest rates should encourage all producers to get their financial house in order,” says Steve Apodaca, ABA senior vice president. 

Similarly, Gary Schnitkey of the University of Illinois advises producers to review finances carefully to avoid repeated low incomes in 2016.

“Commodity prices must increase, or costs must decrease,” he says. “At this point, counting on price increases seems imprudent. As a result, substantial cost cuts will need to occur,” Schnitkey says. 

For Illinois farmers, he created a recommendation to cut costs by $100 per acre, resulting in net income of $19 per acre. He suggests cutting cash rent by $50 per acre, machinery depreciation by $20, seed costs by $18, fertilizer by $10 and other expenses up to $8. 

1. Monitor Purchases- Any new expenditure should generate cash flow to pay for itself over a reasonable time period or be deferred. 

2. Budget Wisely- Create a farm budget that will track all income and expenses—and update it frequently.

3. Review Assets- Verify investments are yielding maximum returns, and consider selling non-farm assets that aren’t.

4. Examine Debt- Review debt structure. It might be worthwhile to increase long-term debt to pay down short-term debt.

5. Document Everything- Have current inventories, cash flows and balance sheets ready to share with your banker.

6. Explore Programs- Ask your banker about USDA-guaranteed farm and rural development loan programs. 

7. Evaluate Risk- Review any hazard and fire insurance coverages and consider eliminating coverage for obsolete or low-risk items.

8. ASSESS Insurance- Review life insurance. Converting to a less expensive term policy from a whole-life policy could make sense.

9. Communicate Frequently- Don’t push off financial problems. Deal with them immediately. Talk to your banker early and often.

10. Take Breaks- Balancing life is as important as balancing a budget. 
Get perspective by taking some time away from business.

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Spell Check

Fremont, NE
11/21/2015 08:32 PM

  I would be very careful with # 8. A good permanent policy may be just what the banker ordered if you have had it any length of time. One it may have excellent cash value that may help you through a tough time. Have you had any change of health do to the stress of lower commodity prices. Is it the type of policy that would allow you to pay nothing for the next 5 or 10 yr and still have your life insurance in place? Just saying that at any age walking away from and older existing policy will almost always cost you in the end. Hope you all have the foresight to look at this one with a clear set of eyes.


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