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Considerations for Successful Year-End Planning

Once harvest begins, non-urgent tasks usually get put on the back burner, especially when it comes to the business side of farming. There are a handful of considerations every agribusiness should be thinking about before the end of the year.  

Pinion Ag Business Advisor Thomas Eatherly says is it important to think about year-end planning now instead of late in the year.

“Once harvest begins, non-urgent tasks naturally get pushed to the back burner. And crops need to be harvested, equipment needs to be kept in operation, and days stretch longer while also getting shorter. But year-end planning will approach quickly and there are some key items every agribusiness should consider. A couple of things that we talked about is understanding the overall financial health of the operation, exploring diversification and new opportunities to create value, which is super important for cash flow purposes, asset utilization and just overall health. And then we also like to in our downtime to educate owners and staff with implementing standard operating procedures, new technology and then talk about margin management and how important that is to the operation.”

Finishing the budget and analyzing inputs and expenses can allow farmers to better project the needs for the next year.

“Most people have a budget but it’s just as important as setting and working the budget, taking the time to tie it out and close it at the year-end. It helps you understand what really happened on the farm, what crops were profitable, and what crops lost money. That is a huge part of the year-end close out process. Secondly, we like to look at year-over-year market value balance sheets for every entity, knowing your working capital position and equity is super important to be able to capture any opportunity that arises as far as buying land, leasing new land, upgrading equipment, and locking in market positions for the next crop year.”

Eatherly says you should also focus on prepaid supplies and equipment.

“This helps with planning, ensures availability and locks in a price which also goes back to margin management. And then, we encourage our clients to talk with their business advisors. You need to be asking about tax opportunities, estate planning opportunities, charitable gifting, depreciation needs, what do I do about bringing the next generation in to be a part of the operation. Where’s my best dollar spent on prepay opportunities, and do I have any other areas of concern that are affecting my business that I could be taking opportunity in or advantage of in order to put myself at a more productive profitable level.”

Finally, he says it’s also important to call your landlords and vendors.

“We really push this because you’re farming their land, they may or may not be on farm, and they will need to understand how is harvest going, what are your goals for the coming year? Is there anything on the landlord’s land that he would like to see done better? And then reach out to the vendors and do the same. We have targeted vendor after vendor that maybe has excess inventory in their warehouse and they want to sell it before year-end at a discount. Knowing what their wants and needs are, you have to use them, they’re part of your operation, we encourage them to embrace their landlords and vendors.”

Pinion offers resources to farmers as they start their year-end planning.

“At Pinion we have a team of professionals that specialize in out-sourced CFO services, ag focused tax consulting, farm program services, and estate planning. And these all go hand in hand when running a successful operation, and our goal is to help leave a healthy business that farms and stays operational for many generations to come.”

Pinion has strategic advisors that can help simplify and navigate the year-end planning process and position your farm business for success in 2023. To learn more, visit PinionGlobal.com.