HAPPY HOLIDAYS December 2016

Transcription

1 Don Nitchie Tonya Knorr Garen Paulson HAPPY HOLIDAYS December 2016 Inside this newsletter: Educational Activities 1099 & W-2 Reminders Preparing for Your Analysis There s an App for That! Educational Activities Farm Transition and Estate Planning: Jan. 19, 2017 in Worthington. Registration information was mailed in December. Visit for flyer and registration information. Share with a friend. Registration deadline is January 13 th. SWROC Winter Crops & Soils Day: Monday, January 30 in Fairmont Tuesday, January 31 in Luverne Wednesday, February 1 in Lamberton Thursday, February 2 in Montevideo & Olivia For more information/updates go to Maximize the Value of Your Farm Why Do We Suggest Year-End Prices? Financial Analysis-Be Prepared SWMFBMA Annual Board Meeting Report Survive and Thrive Farm Financial Management: Tuesday, February 21, 2017 MN Regional Extension Office 1527 Prairie Drive, Suite A Worthington, MN Wednesday, February 22, 2017 UMN Southwest Research & Outreach Center th Street 9:00 a.m. registration and workshop from 9:30 a.m. to 3:30 p.m. To register, contact Gretchen Thillen at gthillen@umn.edu or Further details will be available in January. SW Farm Profitability Conference and SWMFBMA Annual Meeting March 22, 2017 at U of M SW Research and Outreach Center in Lamberton. 1

2 1099 & W-2 Reminders By Gretchen Thillen If the association prepares W-2 and 1099 forms for you, please return your worksheets to your field person by January 6, 2017 or earlier. This will allow time for your forms to be prepared and mailed back to you for delivery to your employees and landlords by January 31 st. Please remember our new e-file deadline of January 31 st. The earlier we get your forms; the more time you will have for review! Preparing for Your Analysis The Finpack year-end analysis we complete in January is the cornerstone for your business s finances. We look at the income and expenses you have incurred during the year, and we tally your assets and liabilities. This information is used to calculate profitability, liquidity, and solvency. The accuracy of this report depends on your preparation. Here are some suggestions to help you prepare: We want you to pay special attention to your inventories. Beginning inventory plus production less grain fed less grain sold must equal ending inventory. Make sure expenses are in the correct category. Separate seed fertilizer chemicals and custom hire into their respective categories. Review your accounting. It is much easier for you to straighten out problems at home than at your closeout session. Measure and record grain stored in bins on the farm, in elevators, fed, and placed in delayed and deferred contracts. Complete this as of January 1. Be sure your loans balance. Separate principle and interest. Beginning balance plus money borrowed less principle paid must equal ending balance. Make sure your cash balances. Beginning cash balance plus all inflows less all outflows must equal ending balance. Fill out our worksheets. They are designed to help you prepare the information we need to complete your analysis Due to the tight margins we are faced with, accurate information is crucial. To make your analysis even more powerful, we encourage you to track your harvest to a landlord or field level. A common practice is to analyze your corn crop as one enterprise, rather than breaking it down to a landlord or field basis. If you are able to track income and expenses to a landlord or field level, a more in depth level of management becomes available to you. At the very least, estimate your crop production between landlord and/or fields. If you use the same description name from year to year, we can run a multiple year report. If we find a trend, perhaps crop input or rent expenses can be adjusted to increase profit potential. The main data needed to do this is crop production broken down to the landlord or field level. This generally is done for crop insurance purposes. Bring this information to your closeout session and we can help you take your analysis to the next level. There s an App for That! This month s app of the month is MN 511. This app checks road conditions as updated by MNDOT and the state patrol. You can highlight the road you are interested in and see what the road conditions are like. It also gives updates to road construction and detours. Download it for free today! If you have an app you find helpful let me know. Maybe your app can be the App of the Month. 2

3 Maximize the Value of Your Farm Financial Analysis By Don Nitchie By now, you should have received a mailing with your Closeout/Analysis instructions and schedules for January and February. Preparation maximizes the value of the effort you and your field person put into the annual analysis of your farming business. Long-time members tell me that they value analysis because this is where the money is to be made. It tells them what their financial progress has been and what components of their business have contributed to that financial progress. It also focuses in on segments of the business where improvements can be made. A FINPACK analysis within a membership group like the SWMFBMA provides a basis of comparison that is consistent in data gathering across your peers or competitors, so the data is truly comparable. As in any research or industry comparisons, if variable prices, asset and inventory valuation methods are used from farm to farm it is like comparing apples to oranges. FINPACK Analysis adjusts your cash accounting for inventory changes to arrive at true profitability and financial gains. Therefore, inventory amounts, values and account balances for loans and checking are very important for analysis. Your records must have all entries made and completely entered including dollar amounts and quantity and weights for product sales. If you are using the Minnesota Farm Account Book, all columns should be properly added. You should have received your Closeout Worksheets ( Supplement to Computerized Records ) at your tax planning meeting this fall or in your closeout schedule mailing if you are a Farm Management Only member. Why Do We Suggest Year-End Inventory Prices? In your closeout meeting notice, you will find that we have suggested year-end prices. These prices are meant to get you thinking about valuing your inventory, as they will change as the market changes until the end of the year. On January 1 st we stop this activity and take a snapshot of the markets and use this price to value your unsold inventory. You will get an the first of January with these final prices. Please use this final price to value your inventory. The cornerstone of your financial analysis is the balance sheet. This financial statement is a snapshot of your financial condition. An important part of the balance sheet, which ties into your income statement, is your grain inventory. In order to calculate your balance sheet, we need to value unpriced inventory. Unless you have a very high percentage of your inventory sold, the value we use plays a large part of determining your financial condition. The unpriced part of your inventory can greatly influence your profitability (income statement), solvency (net worth), and liquidity (cash flow). Benchmarking is an important part of your membership in Southwest Minnesota Farm Business Management. In order for everyone to be on equal standing, we use similar prices for your unsold grain. As a result of benchmarking, we try to pick a price on January 1 st that represents an average price in Southwest Minnesota. Many of you farm close to a processing plant (soybean processing plant or Ethanol plant) whose bid is probably better than the local elevator price we use. We recommend using the elevator price even though the processor bid is higher. Your pricing advantage will appear when you sell the crop. 3 We also suggest a feed price to value your raised feed that you feed to your livestock. This price is a

4 weekly average of the price available in the local market. This price represents the opportunity cost of your raised feeds to your livestock enterprise and the value you would have received if you would have sold rather than feeding your production. As you can see, something as simple as the price of corn can have a large impact on your financial analysis. SWMFBMA Annual Board Meeting Report By Don Nitchie The Southwest Minnesota Farm Business Management Association Board met December 6, 2016 in Lamberton for their annual board meeting. Board Members present were Justin Keller, Wes Beck, Jason Diemer, Ben Fast, Ryan Gravenhof, Mark Christensen, Brent Pohlman, and Ian Sandager. Additional attendees included contractors and staff: Garen Paulson, Tonya Knorr, Janet Froslan, Don Nitchie, and Gretchen Thillen. Additionally, Dale Nordquist of the Center for Farm Financial Management at the University of Minnesota Department of Applied Economics was in attendance. Dale serves as the University representative to the Board. A membership report to the board showed the following number of members as of November 1, 2016: There are 5 new members over the last year. There are currently 124 paid members. As members, please share the benefits of your membership and help us grow the association. Comparison of SWMFBMA Farms to All Minnesota Farms in FINBIN SW ROA (market) MN ROA (market) SW Current Ratio MN Current Ratio SW Solvency (cost) MN Solvency (cost) SW Median NFI MN Median NFI 11.8% 8.3% % $108,862 $56, % 10.3% % $228,454 $121, % 2.0% % $56,012 $27,478 The number of farms completing FINPACK analysis was 106 for will depend on member retention & completion for new members. Time is required to train them and assess their recordkeeping skills as well as start their initial FINPACK balance sheets. The board reviewed the existing association income, expenses and budget for fiscal year The board approved a budget with a 3% increase for We thank the board for their continued leadership and commitment. Membership Update as of Nov. 1, Number of Members Farm Mgt. Plus Farm Management Sole Proprietors Entities (Corps, Partnerships) Members not Renewing New Members

5 Contact Information Don Nitchie SW Research & Outreach Center th Street Phone: Fax: Tonya Knorr Co Hwy 6 Phone: tonyaknorr@gmail.com Garen Paulson US Hwy 71 Jackson, MN Phone: gkpaulson90@gmail.com Gretchen Thillen SW Research & Outreach Center th Street Phone: gthillen@umn.edu 5