2 key steps that can help you build farm financial strength
Building financial strength is a multi-step process, experts say, that takes years to establish. Engagement in how farm revenue is dealt with, along with some financial education are two critical steps in building financial strength of the farm operation.
1. Engage in your farm financials
When it comes to generating revenue, making it often receives greater consideration than where it ends up going, according to Vanessa Stockbrugger, founder of Alberta-based WomenCents.
She stresses the importance of being engaged when it comes to how money’s spent, saved and invested.
“No one cares more about your money than you do. If you don’t make it a priority, nobody else will.”
“No one cares more about your money than you do,” Stockbrugger says. “If you don’t make it a priority, nobody else will.”
Mark Verwey, BDO Canada’s national agriculture industry group leader, adds that increasing revenue for its own sake doesn’t work.
“The measures to increase revenue have to take into consideration the bottom-line impact,” Verwey says. “Financial institutions need to see profitability and the ability to service existing and new debt.”
Verwey says the financial strength of balance sheets and statements of operations must be taken into consideration, and it’s important for the results of both to trend in a positive direction.
2. Grow your financial education
Stockbrugger believes Canadians’ financial knowledge has room to grow. The population doesn’t need to become experts but should have the base knowledge necessary to understand what they have – financial assets, physical assets, insurance, debt, transition plans – as well as available options.
This can partly be achieved by building knowledge through independent, unbiased sources like the Ontario Security Commission and Canadian Total Excellence in Agricultural Management, Stockbrugger and Verwey recommend.
“Knowledge is power, and the more you have, the greater your competitive advantage,” Verwey says. “It’s important to measure your success in dollars and cents and know financially the impact of your decisions. It makes it a lot easier to repeat your success when you know how your decisions impact your bottom line.”
While busy juggling everything else on the farm, building a strong team of financial advisors can be integral to achieving farm financial success by filling in the knowledge gaps, Verwey says.
Stockbrugger underlines the importance of remaining engaged at this stage and probing your advisors for any clarifications or other answers you need.
“Make sure that you ask until you understand,” Stockbrugger says.
Engagement in how farm revenue is spent, saved and invested, as well as basic knowledge in financial terms are just some of the steps farmers can take to build financial strength in their operation. Financial knowledge is power, experts say, and the more farmers have, the greater the competitive advantage.
Article by: Richard Kamchen