Cultivate financial literacy, boost farm resilience

Financial planning professionals spend years acquiring the experience and skills to do their jobs effectively. This is a level of training most people don’t have — but that doesn’t mean financial literacy is unattainable.

For Lance Stockbrugger, Saskatchewan farmer and veteran chartered accountant, taking steps to better understand what the numbers are telling you is an important means of improving the profitability and stability of your farm business.

By improving your financial capability, you can foster stronger, more strategic conversations with stakeholders and advisors.

It will also equip you with essential tools to navigate your business effectively. Understanding financial management will empower you to speak the language of your advisors, ensuring clearer communication and more productive consultations.

It also helps you to calculate costs accurately, negotiate the best deals and make informed decisions to protect your bottom line. By improving your financial capability, operators can foster stronger, more strategic conversations with stakeholders and advisors, ultimately leading to smart management and long-term success.

Learning opportunities

An ideal time to develop better financial knowledge is in school, Stockbrugger says. Not everyone can or wants to attend post-secondary education for finance and business, but taking courses is an option. Courses, seminars and opportunities that actively connect you to mentors and advisors can drive learning.

“You can also get involved in organizations. It helps you see how other businesses run and how they’re financially reporting and managing things,” Stockbrugger says. Joining a municipal council or the board of directors of a local grain terminal — the latter being something Stockbrugger himself has done — are two examples of such opportunities.

Stockbrugger notes that the sheer number and variety of financial courses and tools available can make it challenging to find one suited to your knowledge level.

FCC’s Manage Your Farm Finances program is an example of an effective (and free) course series. The three-part series includes informational sessions with financial experts, case studies, exercises and other resources designed to help people with varying degrees of financial literacy actively learn analytical techniques relevant to their farm operation. Stockbrugger — who helped develop the course — says the idea was to ensure as few barriers to entry and as much flexibility as possible.

“I like the course because it gets down to the basics,” he says. “You can go through it at your own pace. If you find an exercise too simplistic, you can skip it. Or if it’s hard, keep doing it until you get the right answers.”

Leverage advisor teams

Maintaining relationships with trusted financial and legal advisors is essential, says Stockbrugger, who stresses prioritizing expertise over a multitude of opinions. Clients, however, shouldn’t expect advisors to know it all.

“No one knows everything,” Stockbrugger says. He recommends having multiple advisors with diverse expertise, though usually one or two will “rise to the top,” offering key support and insights for different business scenarios.

“Take that one individual you really trust and make them that key go-to person. Then, utilize their network. They work with different people and their own team, who they call on to help.”

Stockbrugger emphasizes that effective financial advising requires genuinely engaged clients who understand their business. Without this, meetings are less productive and both sides may feel unsatisfied. Clients who invest in financial literacy generally see better returns, are equipped to make more informed business decisions and often have lower advisory costs.

Use smart tax strategies

Tax and business planning are linked but not the same, yet Stockbrugger often sees farm owners mistakenly treat them as such, sometimes taking undue risks or missing opportunities in an effort to not pay as much tax.

Deferring grain cheques — not requesting payment from the company that bought your grain – to avoid tax is an example. In such cases, the commodity provider essentially provides an unsecured line of credit to the grain purchaser. If that purchasing company collapses, though, the money owed to you can disappear.

Another common strategy is to incorporate a farm to capitalize on corporate tax rates and increase the amount of available net income. While incorporation has many benefits, says Stockbrugger, understand that personal income, among other tax realities, still applies.

“So many people got into corporations and didn’t understand what that meant. One main misconception is that after a farm is incorporated, they sometimes feel no need to pay further personal taxes. This can cause a lot more tax problems in the future when it comes time to retire or transition the farm,” Stockbrugger says.

Honest communication is key

Regardless of your level of financial literacy, Stockbrugger reiterates the importance of honest communication — with both advisors and yourself.

“Accountants like to say numbers don’t lie. They tell the true story of financial efficiency and profitability. Embrace the numbers and ensure you use them to your fullest ability.”

Investing in your financial literacy is one of the most impactful steps you can take to ensure your farm business’s profitability and resilience. Free resources like FCC’s Manage Your Farm Finances program or paid courses tailored to your needs can provide invaluable insights in bite-sized pieces.

Whether you’re just starting or looking to sharpen your skills, gaining knowledge bit by bit can help you to navigate complex decisions and build a stable, sustainable operation.

From an AgriSuccess article by Matt McIntosh.