Individuals involved in the farming industry—the industry that helps make it possible for us to eat and enjoy certain products—often face unique financial challenges. There are countless variables, including climate and weather, that affect farmers far more than those working in office settings. As a farmer, each of these variables will need to be considered whenever you are developing any sort of financial plan. If you are searching for finalcial tips than BBLLP is one of the best accounting firms Saskatoon.
If you are currently involved in the farming industry, it is important to take a proactive approach to your current financial situation. By preemptively preparing to address the industry’s variability, you will be in a much better position to embrace any future challenges.
1. Invest Heavily in Insurance
Many of today’s largest insurance corporations—including State Farm, All State, Farmers, etc.—were originally created to help farmers. Farmers know that bad seasons are inevitable, but they can’t always anticipate when these seasons will occur. Investing heavily in insurance is something that will certainly pay off and help smooth cashflows over time.
2. Take Advantage of Government Programs
Relatively speaking, the farming industry is substantially subsidized and supported by the Federal Government—however, it remains up to the individual farmers to actually take advantage of these programs. Be sure to investigate the support being offered by the USDA and other government entities. Support has increased even further since the COVID-19 outbreak.
3. Diversify Your Crops
Diversification is key in almost every industry and farming is no exception. By planting many different types of crops (and cycling between seasons), you can protect yourself from sudden changes in market prices. Even if there is a particular crop you prefer to grow, having some degree of diversification is still important.
4. Remember: Cash is King
Many farmers will allocate all of their wealth into illiquid assets, particularly land. However, though land will be needed to expand your enterprise, you should not overlook the importance of cash. Make sure to begin building a cash fund that can be accessed in various situations.
5. Restructure Your Debt
Farming often requires substantial amounts of debt, including mortgage debt, traditional loans, and loans from the federal government. If your current debt load has become unmanageable, consider restructuring the debt and looking for other options.
6. Look for Permanent Employees
The farming industry often relies on seasonal employees, which are cheap in the short-term but inefficient in the long run. Once your business has grown enough to sustain full-time employees, you should consider restructuring your employment model.
7. Begin Preparing Taxes Early
Taxes are one of the most common sources of frustration for farmers. Rather than waiting until the very last minute to begin preparing your taxes—something that many people, including farmers, tend to do—keep track of these expenses as they accrue. Even if you are not yet ready to pay your tax bill, it certainly helps to know what you are going to end up owing.
8. Hire a Financial Expert
Financial advisors play an important role within the farming industry. They’ll be able to help you manage your ongoing accounts, plan for future expansion, and also help reduce your personal exposure to financial liabilities. Even if you are well-versed in finance, hiring some outside help will almost always be a good idea.
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1. Quarterly Taxes
April 15th is a date that we, the taxpaying citizens of the United States, have probably heard a thousand times. But did you know that, depending on the nature of your business and income, you might also owe taxes every quarter? Confirm that you are paying your quarterly taxes, otherwise your debts will begin accruing interest and may end up facing other penalties.
2. Liquidity
Liquidity is a term used to describe “how close” your current assets are to being turned into cash. While cash-in-hand will be considered extremely liquid, physical property—such as land or a home—is considered much less liquid. A good financial portfolio will usually have a range of liquidity and a diversified set of assets. Make sure that if an emergency were to occur, you could generate the cash needed to address it.
3. Leverage
In most cases, you can probably afford to access much more capital than you currently possess. Having a good credit score, as well as assets that could potentially be used for collateral, will help you generate the sort of leverage you need to make major purchases. Issuing a down payment when buying a house is a common example of utilizing leverage.
4. Preparing for Sale
There are many things you’ll need to consider when preparing any valuable asset—a home, a farm, a business, etc.—for sale. Usually, this process begins with getting a fair valuation and understanding your current claim to ownership. Consider working with a financial representative to ensure you are taking the right steps.
5. Business Valuation
How much is your business currently worth? Most business owners cannot give a straight answer to this simple, but important, question. There are many different ways to valuate a business, including looking at the enterprise value as well as the equity value. If you are preparing to sell your enterprise, consider exploring multiple different valuation strategies.
6. Latent Taxes
Taxes are confusing and, when ignored, can create a wide range of problems for well-meaning people. Latent taxes are just one example of taxes that many people tend to overlook. Whether you are addressing latent taxes, deferred taxes, or any other type of taxes, you’ll need to work closely with your accountant and confirm you are making the right payments at the right times.
7. Matrimonial Disputes
Many people wrongly assume that a divorce is the only instance in which spouses might need financial litigation. However, there are plenty of instances in which married people might want some outside help. If you and your spouse currently have concerns about ownership, obligations, and—most commonly—personal tax issues, it’ll be a good idea to speak with a professional financial advisor such as BBLLP as they consider well in providing tax services saskatoon.
8. Working Capital
How much money do you currently have to work with? Essentially, this is the question that working capital hopes to answer. Increasing your access to working capital can help your business pursue new opportunities, settle existing debts, and improve its current balance sheet. As a result, working capital is often considered to be one of the most important business metrics.
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