Financial management is an important part of running an agricultural business. The process of recording, gathering, and analyzing financial information is essential in understanding the performance of your business.
If financial management is not your strength, consider working with a financial advisor who is able to gather and organize your business information for you.
Financial management serves a variety of purposes. It allows you to establish a cost of production, which in turn helps you determine your marketing strategies. A thorough financial management plan also allows you to monitor debt service and make important planning decisions.
Critical components of stable financial management:
- Regular recording and monitoring of financial transactions
- Analysis of past and current performance
- Forecasting future performance, including cash flow and debt service
- Setting and monitoring financial goals
- Planning for the unexpected
Financial management starts with the development of a suitable financial information system. This will allow you to analyze the information and establish financial goals, which are required to set future performance benchmarks.
Here are a number of finance tasks that business owners must focus on:
- Evaluate current record keeping system
- Determine what information you need
- Determine requirements of lending institutions
- Assess your analytical skills and, if needed, get training or assistance
- Monitor financial progress on a regular basis
- Establish personal benchmarks for different areas of your farm operation
- Review year-to-year performance