Safeguard your balance sheet with these tips
Last year was a tough one. I think there were a lot of us who couldn’t wait to move on from 2019 and to begin looking ahead to a brighter 2020. Little did we know that 2020 would be marked with a growing pandemic, a crashing economy, a crippling of the work force, and the never-ending isolation from our social circles, our schools, our churches and our communities.
Combine all that with the fact that it’s been a really challenging couple of years for beef producers, and the COVID-19 crisis is the perfect storm to wreak havoc on our agricultural businesses, our family relationships, our physical health and our emotional wellness.
Yet, cattlemen and women are a resilient bunch. We’ll fight for our liberties, our freedoms, our land, our livestock, our fellow Americans and this beautiful way of life.
Despite our determined attitudes and our desire to fight tooth and nail to protect ourselves from outside forces crushing our livelihoods, the fact of the matter is, our very survival relies upon how well we can cash flow through an emergency — in this case a global pandemic of an unpredictable novel virus.
Now the mainstream media may be blowing things out of proportion or we may have no idea how bad it could really get — either way, we can’t lose site of what’s happening at home if we are to thrive when the dust settles on this crazy situation we are all facing together.
Jack Davis, South Dakota State University Extension crops business management field specialist, recently shared an article titled, “Cash flow is critical,” which included seven ways we can increase our cash flow and weather these difficult storms.
While it might be hard for some to turn things around in our current predicvament, you can bet we will all become sharper with the pen and calculator when this deal is over! His business management checklist, for operating in both strong and volatile economic conditions includes the following:
• Know your numbers: Davis says, “Understand what is making you money and what is not. Compare your financial ratios and expenses.”
• Price risk protection: “Market on your margins, locking in profits when available,” he advises.
• Adapt conservation practices: Davis writes, “Check on conservation programs through NRCS.”
• Reduce direct costs: Davis suggests we use more time evaluating our top direct costs such as fertilizer and seed.
• Cash rent: “It may not be prudent to continue sustaining losses on high cash rent farms,” he says.
• Capital purchases: “Invest in operational efficiency and excellency,” he writes. “You may need to reduce capital purchases.”
• Non-farm cash flows: “Manage time resourcefully,” he adds.
A seasoned producer told me to prepare for an economic crisis or agricultural production hardship to occur every 10 years. During each decade, if you live and prepare for the hard times, especially when times are good, it will provide a better cushion to weather the difficult chapters as they arise. And they will arise!
If COVID-19 has taught me one thing it’s that as we social distance and worry for the future, the best and most important thing we can do is to prepare for the unexpected variables outside of our control by doing our best to manage the things we can control.
Do you have advice for young producers as they navigate the current economic market conditions of this current pandemic? Please, email me at email@example.com. I would love to hear from you! ❖
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