Proactive Strategies for Business Success: Good Records & Budgeting

If the past several years have taught us anything, it’s that we need to be agile. While we can’t plan for the unexpected — and the unexpected will come — we can be informed and proactive. Planning ahead using available insights can help you strategically accomplish your business goals. So, what can you do today to set yourself up for success?

We recently sat down with subject matter experts from various job roles within Farm Credit East to see what advice they could give to agricultural, commercial fishing and forestry producers for their businesses now and in the future. The conversation covered a range of topics, all of which had one goal in mind: your business success.

Start with good records

To strategize optimally, you need an understanding of where you’ve been and where you’re going, and that starts with strong records. What are the steps to get your books in order?

1. Know your input costs
   • The start of any good business plan comes with an understanding of your input costs and expenses. Input costs have a direct correlation on crop insurance policies and financing considerations, and they can indirectly affect your tax planning as well.
   • A balance sheet helps provide an understanding of assets and liabilities, both for your own planning as well as to give your vendors a full financial picture of your business.
2. Understand your cash flow
   • While spending time calculating input costs, you should also consider developing a monthly cash flow budget for the year. Most agricultural, commercial fishing and forestry businesses are seasonal. As a result, you may be in the red some months, and in the black, others — this makes financial planning that much more important. A cash flow budget helps map out how your cash might flow from month-to-month so you can plan accordingly

Stick to your budget

Now that you’ve established a balance sheet and a cash flow plan, it’s time to talk to your loan officer or business consultant about creating a capital expenditure plan. This plan allows you to think intentionally about what needs to be purchased this year or into the future and strategize around the best time to make that purchase.

Senior loan officer Paul Webster advised, “When you make your capital expenditure plans, try to stick to them. Just because you have some extra in the checking account right now, doesn’t mean you can simply veer off your budget.”

Creating working capital for your operation is key. Having a little bit extra for a rainy day can provide flexibility, lowered stress and a small sense of peace.

Short-term debt, long-term reward

Leveraging debt through a loan or lease might seem scary, especially for someone who is used to buying things outright. But short-term debt can help you reach your goals without strapping your budget too tight.

A common mistake is not using financing, or financing on too short a term. “Customers may try to pay off debt fast on a very short term because they don’t want to spend interest,” said Paul. “But sometimes, that backs them into a corner because they lose the flexibility of working capital.”

The bottom line — don’t be afraid of using debt on the appropriate term to finance assets.

If you’re interested in learning more about recordkeeping, cash flow, budgeting or credit, call your local Farm Credit East office or submit an inquiry via FarmCreditEast.com/ContactUs.

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