Bankers like Alan Hoskins, president of American Farm Mortgage and Financial Services say so-called “shoebox accounting” is increasingly rare. But he says modernizing accounting is still not enough in today’s financial environment.
“It’s a great first step, but there’s no standing still,” he says. “You either move forward, or you move backward. This is an opportunity to take data and become more inquisitive and find new ways to improve finances.”
That’s not a job that falls solely on the farmer, either, Hoskins argues. Rather, it’s a task that a farmer should tackle with his or her banker, accountant and even attorney.
“If we’re truly going to add value to our customers, part of what we need to do is just sit down and go through the numbers and help them understand those numbers,” he says.
Trendspotting can provide tremendous value to a farm operation, Hoskins says. When farmers have four or five years of balance sheets, they can really look into areas where they excel, as well as areas to improve.
Farmers should also revisit finances on an ongoing monthly basis, Hoskins says.
“A factory has 12 production cycles per year,” he says. “Corn and soybeans have one crop per year – but by looking at it every month, it allows you to see the trends of cash flow. You’ll be able to make better management decisions by embracing that habit.”
Good habits are often simply the product of repetition, Hoskins says. To that end, make sure you’re exercising your financial muscles and establishing positive patterns of financial review and open communications with your lender, he says.
“I think that’ll lead to better discussions with your lenders, and it will ultimately help you to understand your finances in a different way,” he says.