Proper financial management means taking action now

Far be it for me, or anyone else, to pass judgment on any farm’s financial situation.

However, I do think that it’s entirely reasonable for someone to ask questions, to probe, to make observations on financial performance, and of course, to make suggestions or recommendations.

A farm’s current financial position is a function of management decisions that were made in the past. I don’t know of any farmer who would have purposefully set out to make decisions that would have worked to result in poor financial outcomes.

With that in mind, then, someone making a judgment on a farm’s financial performance would have had to have been included in any and all financial decisions that have taken place on a farm over an extended period of time.

Management consultant Mike Richardson stated that, “if you don’t like your cash flow in the present, look at your conversations (decisions) in the past. If you want a certain cash flow in the future, focus on your conversations (decisions) in the present.”

Financial management, understandably for a lot of farmers, can be frustrating, especially when problems arise due to circumstances that are beyond their control. There are weather challenges associated with drought and market issues associated with international trade — challenges that will result in financial problems for many farms. When the events stack up and persist for two or three years, it can become nearly impossible for farmers to survive.

The first sign of financial difficulty often comes in the form of a growing fear, or a reality, that funds will not be available when needed to pay bills.

Some farmers will become aware of pending difficulties by analyzing budgets. Others will find out when their operating loan is too small to overcome a mounting pile of bills and payments.

Whatever the circumstances, this anxiety about a cash shortfall is an early warning that things might soon be or are already very wrong financially.

I often hear a couple of comments from farm families about their financial performance:

  • We don’t know how well our farm is doing financially.
  • We don’t know where to look for changes that could be made.
  • We don’t know what to do first.

If any of these resonate, take action.

The last one may be the most critically important. I’ve observed farms that, when experiencing financial problems and where they don’t know what to do first, end up doing nothing. Doing nothing equates to leaving things to the luck of the draw. It may rain; prices may improve — and at some point they will. However, those things may not happen in time for a farm experiencing financial distress.

If you have financial challenges (or are worried that you might be, as in the first bullet point above), avoid the trap of inaction.

The industry dealt with farms in the 1980s and into the 1990s that were technically insolvent, where liabilities were greater than assets. This would be extremely rare today, given land values. The insolvent farms didn’t have many, if any, options financially. Farms with equity do. They may not be great options but are options nonetheless. You have a degree of financial control over your situation if you have an option.

Focus on your conversations (decisions) in the present. Do not leave things to chance. You may be lucky and things will work out. But then, maybe you won’t.

Be proactive. I’ve talked to farmers who were financially stressed and who decided to take action. In doing so, they experienced a sense of relief and found the proverbial light at the end of the tunnel. Taking action in and of itself can be helpful. It’s a bit like lying in bed in the morning with a mountain of things to do and not enough time or resources to get it all done.

The work won’t happen by itself. The longer a person lies in bed, the worse the problem becomes. It can feel overwhelming at times. You might as well get out of bed and get to work.

You definitely want to avoid letting inaction turn into financial paralysis where eventually you lose control of your financial situation and have solutions imposed on you.

Unfortunately, I’ve watched this happen to farms as well. The cost extends far beyond the balance sheet, impacting on relationships and emotional well-being.

As difficult as it may be, if there is evidence of financial challenges, find someone to talk to about it and come up with a plan. It’s really important to talk within the family about the problems. If the family discussion is too difficult, get someone such as an accountant, consultant or counsellor to help.

Another good step is to visit your lender sooner rather than later. Maintaining regular communication with lenders when facing a potential financial crisis is critical.

Terry Betker, P.Ag, is a farm management consultant based in Winnipeg. He can be reached at 204-782-8200 or

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