Financial management can sometimes be frustrating for farmers, especially when problems arise because of circumstances beyond their control.
This summer’s weather challenges — drought, hail and excess rain —will result in financial problems for many farms.
It’s bad enough when this happens for one year, but it can be-come nearly impossible to survive when the weather incidents stack up over two or three years.
The first sign of financial difficulty often comes from within, in the form of a growing fear that funds will not be available when needed to pay bills.
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Some farmers will become aware of pending difficulties by analyzing budgets, while others will find out when their operating loan is too small to overcome a mounting pile of bills and payments.
This anxiety about a cash shortfall is an early warning that things might soon be or are already very wrong.
I came across a pamphlet published some time ago by Manitoba Agriculture that I think could be relevant to farmers who may be experiencing cash flow difficulties this fall and winter.
The chart on the right, adapted from the pamphlet, will help determine whether you have a potential personal or business financial problem.
Three or more “yes” answers in this section is evidence of financial difficulties ahead.
Answering “yes” to questions 2, 5, 6, 8, 9 and 10 means the problem might be more serious than you want to recognize.
As difficult as it may be, if there is evidence of financial challenges, find someone to talk to 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.
Provincial governments have free services available to help with many forms of stress:
- Manitoba: 866-367-3276
- Saskatchewan: 800-667-4442
- Alberta: 877-303-2642
Another good step is to visit your lender(s) sooner rather than later. Maintaining regular communication with lenders when facing a potential financial crisis is critical. Being proactive can help considerably.
Symptoms of financial problems
Personal matters
Am I:
depressed? yes/no
edgy? yes/no
not sleeping well? yes/no
Do I find myself worrying about:
having enough money to pay bills? yes/no
meeting my loan payment commitments? yes/no
Do I try to keep my worries from:
my family? yes/no
people I do business with or owe money to? yes/no
myself, so I don’t have to face the problems? yes/no
Am I avoiding people I owe money to? yes/no
Do family squabbles occur more frequently than usual? yes/no
If yes, are the squabbles usually about money? yes/no
Do I hate to see the mail come in because it might bring more bills? yes/no
Financial problems are likely developing if you have more “yes” than “no” answers.
Answering “yes” eight times or more likely indicates a serious financial problem associated with your business. It should be addressed sooner than later.
Business matters
1. Do I regularly leave outstanding balances on monthly bills andcredit cards? yes/no
2. Have I started using credit cards to pay bills because my operating loan is at its maximum? yes/no
3. Have I borrowed additional moneyto pay bills and expenses? yes/no
4. Will I soon have to increase the limit on my operating loan? yes/no
5. Has my operating loan limit been reduced because of my financial situation? yes/no
6. Have I borrowed money from an equipment finance company to finance a purchase rather than my main lender because I couldn’t get a loan from my lender? yes/no
7. Have I been selling more than my normal level of grain and livestockto pay bills? yes/no
8. Has a lender requested a payment that I was unable to meet? yes/no
9. Has any lender requested that I apply proceeds from farm sales directly toward repayment of a loan? yes/no
10. Have I had any demand loans called or threats made to seize collateral? yes/no
11. Have I been shopping for another lender because I have been deprived of credit? yes/no
