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Paul Neiffer: Cut These 3 Costs

17:00PM Jun 12, 2015

Producers who want to cut costs amid tight margins should take a second look at several line items in their personal and professional budgets, says Top Producer columnist Paul Neiffer, a CPA and partner with CliftonLarsonAllen. To watch a video clip with additional information, click the play button below.

Power Hour Noon LogoFamily Living. “One area where I think expenses have gone up that we don’t talk about enough is living expenses, that lifestyle cost,” Neiffer explains. “When times were good, it was easy to add on that extra $1,000 a month or $2,000  a month for whatever it might be. This is an area where you can shrink that cost, and it doesn’t necessarily have to be a permanent savings. But it can help them get through the next couple of years.”

Machinery And Farmland. “A lot of farmers have bought a lot of equipment over the past few years and they paid for it either out of cash or very short-term borrowing,” Neiffer notes. “Maybe their land’s all paid for. When times are good, that’s probably the appropriate leverage. But when times are a little tougher, maybe it’s better that they have some long-term borrowings on the land, which they can get right now at a very low interest rate—in some cases, as low as 3%—and then have that machinery financed over a longer period of time.”

Inputs. “This is not necessarily the time they [should] skip on farm input costs,” Neiffer points out. “What you need to really look at is what we call the contribution margin. … Look at each one of those inputs, this input, maybe it costs $20 and it generates $50 of revenue. That’s a good input. But if this input costs $20 and it generates maybe $25 in revenue, then yeah, I would probably cut that input.”