Last week, we discussed some of the ways to manage the physical and mental aspects of financial stress. This week, we take a look at some practical ways you can manage your income and cash flow.
1Control cost
Determine which inputs produce sufficient revenue to cover their cost. Most farmers have done a good job in the last 10 years of keeping costs under control, but you should consider all strategies and options.
2Renegotiate cash rents
Rental rates have risen significantly over the past seven to 10 years and are one of the largest cost items in crop farming. There may be some flexibility, since rates are often negotiated on an annual basis.
3Reduce capital spending
Take a more cautious approach toward machinery and equipment purchases. This may be the year to repair rather than replace. And if you do replace, this may not be the best time to buy additional capacity, or to upgrade.
4Reduce family expenditures
Family expenses are often difficult to cut, but you may be able to make adjustments in your discretionary spending, such as vacations, and postpone capital items such as a new car. Be careful not to cut essential services, however, like health and medical insurance.
5Increase revenue
Do you have assets that are not generating as much revenue as they could? Can you rent out your storage facilities or your hog buildings to generate additional revenue? Under-utilized assets can be particularly costly during times of financial stress.
6Increase non-farm income
In addition to your farming operation, you may want to look at the potential for non-farm income. An off-farm job may not seem attractive, but should at least be a consideration.
Sources: Purdue Extension.
Next week: Farm and Dairy will look at how to manage financial liabilities.
(Farm and Dairy is featuring a series of “101” columns throughout the year to help young and beginning farmers master farm living. From finances to management to machinery repair and animal care, farmers do it all.)
More Farming 101 columns:
- 5 tips to recognize and deal with farm stress
- How to prepare a livestock birthing kit
- 5 tips for marketing your farm
- How to develop farm mission, vision statements
- 5 tips for setting farm goals
- 2 types of livestock insurance policies
- 6 things you need to know about WFRP plans
- 3 basics of crop insurance
- How does liability insurance work on the farm?
- Why do I need farm insurance?
- How to understand and use Ohio’s CAUV
- How to utilize the Pa. Clean and Green Act
- 9 tips for filing farm taxes
- 8 reasons record keeping for taxes is essential
- 5 tips for post-harvest storage
- 7 tips for family meetings on the farm
- 4 tips for balancing your farm and family
- 4 tips for communicating on the family farm
- 4 tips for firing an employee
- 6 tips for keeping good farm help
- 4 tips for recruiting farm labor
- 5 general farm labor laws
- 4 tips for employing minors
- 4 tips for PTO safety
- 5 things young farmers should know about finances
- The farm balance sheet
- 5 items for your farm’s cash flow statement
- Personal and business records: Keep them separate
- What to include in your farm business plan
- How to approach a lender: Tips for getting a farm loan
- How to use microloans to get your farm started
- Saving for the future: 6 tips for young farmers
- How to create a farm safety kit
- 5 tips for child safety on the farm
- 4 tips for transporting livestock
- 5 ways to better understand tractor stability
- 6 farm equipment hacks
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