BY JOE KOENEN
I know some of you may already have done this but I want to discuss cash flows and working with your lender today. We all know that doing a cash flow is challenging, this year in particular with prices for inputs.
Cash flow estimates are something you need to do every year to see where you are at and what the year looks to hold. There are aids to help you such as MU budgets which are located at https://extension.missouri.edu/programs/agricultural-business-and-policy-extension and click on budgets. However, this year is more challenging due to the variability of fertilizer, seed and chemical prices. The MU budgets are done in the fall so keep that in mind. Don’t forget the budgets include forages, fruits and vegetables and industrial hemp. Livestock budgets are there also. These budgets should be used as a guide and your figures from the previous years in most categories are the best ones to use. If a number is far out of line with lender or MU budgets, be prepared to justify them. It does not mean they are wrong.
Before you do a cash flow estimate, you need to know your crop and livestock plan for 2022. A balance sheet done at the first of your year is a must too. The balance sheet will have what crops and livestock you will sell in 2022 if any. If you have grain contracted, figure that in at that price. The more information you can give your lender the easier it is for them to help you. Remember taxes for any employees or family help. If you have a specific question about a cash flow or need help, contact your local extension center (660- 646-0811) and they can find you help.
Some key items to keep in mind when working with your lenders are 1) always be upfront with them, 2) they are there to help so take advice, 3) if something unexpected comes up during the year that affects finances, let them know ASAP. The same is true when working with your landlords as well.
On another note, if you have forgotten or did not send a 1099 form to someone you needed to (over $600 paid during the year), doing so immediately is much less costly than not doing it if you get caught. Keep in mind your local CES Ag Business person can help you with some income tax questions also.
Joe Koenen is an Agricultural Business Specialist with the University of Missouri Extension.