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The Management Calendar
Farm Business Management Update, August - September 2008
By Gordon Groover (firstname.lastname@example.org), Extension Economist, Farm Management, Department of Agricultural and Applied Economics, Virginia Tech
All farmers and their advisors need to have an understanding of the Food, Conservation and Energy Act (FCEA) of 2008, AKA the 2008 Farm Bill. Listed below are three sources of information to help in this process.
Farm business managers, consider the following sources of information and activities to put on your management calendars for August-September.
- Sign-up for the 2008 Direct and Counter-cyclical Payment Program (DCP) until September 30, 2008. While you are at the FSA office, ask about new provision and signup dates for the 2008 Farm Bill. Many of these new provisions will be in stages over the next year so make sure to stay informed.
- Input prices (fertilizer, fuel, chemicals, etc.) are rumored to be much higher next year. Look for alternatives, volume discounts, and pre-season purchases, use of manure, and over-seeding with legumes. Make sure you push a pencil or the computer to see the impact of these decisions. For example, use of covers in place of nitrogen on pastures and grass hay crops or soybeans versus corn. Finally if you pre-purchase inputs for 2009 be sure to consider the tax implications, e.g. that you will have enough income in 2008 to cover the added expenses of purchased inputs for next year.
- As harvest time approaches, be sure to get your crop records in shape. Include yields, machine times, and equipment used (this information will help with next year’s budgeting); identify weed problems and differences in hybrids. In addition to recording information on weeds, etc., think about labor constraints and bottlenecks slowing down tasks during the harvest season. Have employees and family members record problems and successes (maybe give them a cash payment for each problem identified). When the crunch is over, spend a couple hours reviewing notes on what can be done next year to solve the problems and duplicate the successes. During the post-harvest review make sure the discussion centers on how to resolve problems, not who to blame. Also take a close look at the yield potential of each field; with input costs at their current levels, some fields may no longer provide sufficient profit margin during periods of moderate drought – changing crops may provide that hedge against a major loss.
- Always pay close attention to cash flow needs as you generate cash reserves during fall harvest and get ready for real estate and personal property taxes this winter. Almost all computerized recordkeeping software, e.g. Quicken® or Microsoft Money® and accounting software, e.g. QuickBooks® or FarmWorks, create cash flow reports that assist in managing cash available for debt service, family living, and cash expenses. Compare this year’s cash flow to the budgeted amount and highlight deviations. If you did not develop a budget for this year, compare your inflows and outflow to last year’s August totals. Make sure you have a series of possible plans to address any projected cash short falls. Projected surplus should be added to your retirement program, e.g.’s, 401-K’s, or used to pay down debt.
- The time to make tax management decisions is quickly approaching. Make sure that you have set aside a few days in October to summarize all farm and family financial records and make an appointment now with your accountant to work on end-of-year tax management strategies.
Virginia Cooperative Extension