4 Ways to Get Ahead on Your Finances in 2024

Posted February 2nd, 2024 | By Jordan Howe

Just like tending to your personal finances, nurturing your farm's financial well-being is essential. Seize the opportunity at the start of the new year to reassess your financial plan and establish income goals for the upcoming year. Consider what steps you can take to achieve those goals and promote financial stability. In the face of potential challenges such as unpredictable weather or market fluctuations, focus on proactive strategies that will help you navigate and overcome these obstacles. By adopting a positive mindset and embracing effective financial planning, you can position your farm for success in 2024 and beyond.

Here are four things to consider as you plan for 2024.

1) Compare last year’s business plan to this year’s

Take a proactive approach to ensure your financial success by carefully reviewing and updating your business plan. Begin by aligning your business plan with your agronomic plan, ensuring it reflects a clear outlook on income and expenses for the year. As part of this process, evaluate your numbers from the previous year and make necessary updates to the coming year’s projections. Evaluate if the goals you’ve set for yourself are realistic and modify accordingly. Consider factors like market trends, geopolitical conditions, inflation, and other challenges and opportunities you may encounter. By examining your plan with fresh eyes and making adjustments where needed, you can set yourself up for a successful year in farming.

2) Create financial flexibility by keeping cash on-hand

The old saying “cash is king” or refreshed saying “cash is queen” may ring true in a number of situations. Keeping some cash available can help give you peace of mind that you have a cushion if you need it. If you can work out your financial plan to optimize your cash flow and provide for some cash on-hand, you’ll be in a stronger position if anything unexpected comes up. Maybe the farm down the road goes up for sale and you want to expand, or your tractor breaks down and costs more to fix than you had planned. If you have cash available, you can act quickly to expand or to make improvements so you’re operating smoothly. Building up a rainy-day fund strengthens financial resilience, offering a buffer in an increasingly dynamic agronomic and economic landscape. It shields growers from immediate financial pressures by minimizing disruptions at the most critical times.

3) Explore the economics of blended-finance offers

It is easy to focus on the stated interest rate, but a blended financing rate takes into account the different interest rates associated with several financing offers. This allows you the chance to gain a more precise and all-encompassing comprehension of the total cost of borrowing. It might require an additional step in the evaluation process, but taking that time can add up to notable savings. Here’s a hypothetical example if you financed the purchases of three different inputs, all for the same amount and over the same financing period:

  • Input A at 1.9% APR
  • Input B at 2.9% APR
  • Input C at 9% APR

In today’s market, you would likely pay a financing rate somewhere between 8.25% - 11.5% APR when using an operating line of credit. While the higher 9% interest rate in our example above might seem high, if we calculate the effective interest rate of these consolidated purchases, we get to a 4.6% APR. Not only does this rate result in significant savings, but you’d be able to simplify your purchasing experience and preserve your line of credit for other unforeseen events.

In addition to gaining a better understanding of the true interest rate, it is good to think about other things such as how frequently interest accrues. For example, is interest compounded daily or monthly? Or are there repayment grace periods that might benefit you? Understanding the true cost of financing can assist you in calculating the potential economic implications in order to make more informed decisions about those financial commitments.

4) Develop a cash flow strategy aligned to your marketing objectives

Developing a well-defined cash flow strategy that aligns with your marketing objectives is crucial. Effective cash flow management ensures that farmers can effectively navigate the revenue cycles associated with marketing to capitalize on market opportunities. By carefully assessing your cash flow needs, you can strategically allocate funds for input purchases, operational expenses, and risk management tools such as crop insurance or hedging. A robust cash flow strategy enables you to seize favorable pricing windows, minimize financial stress during market downturns, and maintain the financial stability necessary to sustain and grow your farming operation.

Having the right financing instrument is equally vital in optimizing cash flow management, especially to accommodate agriculture revenue cycles. For example, financing can provide the necessary working capital during peak input purchasing and production periods. It is also important to have access to repayment structures that align with harvest. It allows you to manage cash flow effectively during periods of waiting and potential market fluctuations, ensuring you can cover expenses and seize market opportunities when the time is right.  As revenue cycles fluctuate throughout the year, financing can help you maintain a consistent cash flow, meet financial obligations, and seize profitable marketing opportunities, ultimately contributing to the long-term success and sustainability of your farming operations.

Managing your farm requires a steadfast commitment to your total operation. The beginning of the year is a good time to take a few proactive steps that will set you up for financial success and help you be ready for spring planting. Having trusted relationships by your side can be invaluable in navigating the dynamic landscapes where cash, financing, and your unique goals intersect. It is our privilege to serve you with tailored support for making sound capital management decisions for your input needs. Interested in more stories like this, go to our blog page.

Jordan Howe

Jordan Howe is a Senior Territory Sales Manager for Nutrien Financial. He remains involved in the operation of the same family farm that he was raised on in Iowa. Jordan provides payment solutions to growers to increase their buying power and maximize every opportunity for success.


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