Financial Tactics for Farm Management During Tough Times

The agriculture industry is a cyclical one—this is helpful to remember during times of downturn, such as the industry is currently facing. If you can ride out the low, it will be followed by a new high. A recent article for Successful Farming presents four different financial tools that can help agriculture businesses stabilize operations through tough times and accelerate growth during times of plenty.

  1. Financial Analysis Systems – Specialized diagnostic tools help farmers glean insights about the health of their operations. They evaluate financial information to reveal status information on profitability, debt structure, efficiency, and more. The article recommends two specific systems, the Farm Finance Scorecard and the DuPont System for Financial Analysis.
  2. Budgeting – This is a tried and true method for increasing stability within financial operations. It requires the budgeter to think about the future and what is feasible, financially, for the organization.
  3. Analysis of Variance – This is the process of comparing the reality of financial outcomes to the projections or estimates included in the budget. Variance analysis is helpful in refining budgets and informing future projections.
  4. Partial Budgeting – This is a strategy that managers can use to evaluate the potential impact of making operational changes. It involves creating a hypothetical budget that accounts for financial moves that are under consideration.

For more details, read the article in full at Successful Farming.