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October is planning time. I know October is weaning and harvest time for most places, but getting financial planning in mind is critical. Because when the fall work is done, we need to be able to dive into next year. At this point in the year most farms and ranches know their production well enough to be within rounding errors of final incomes and expenses. If I were to analyze your business right now, I would want to see four different sets of numbers to analyze the financial health of the business.

  1. Economics: Planned production and costs for next year including cash and non-cash transactions to determine profitability.
  2. Cash flow: Monthly estimates of cash inflows and outflows to predict the need for short-term financing. 
  3. Balance sheet: Equity can determine the speed of which decisions are made and implemented.
  4. Tax estimate: Regardless of profit or cash flow, timing of sales and purchases will significantly affect the tax return.

With those reports, we can generate a lot of discussion from enterprises to soil health to your happiness while working the ranch. Even without those reports, here are some mile-high view statements for you to consider.


You are in charge of your finances:

I always enjoy Stan Parsons’ quote: “the cash flow is the minutes of the meeting written in dollars.” It’s a simple but impacting statement. You tell the story of what is going to take place on your operation next year. You know what you are going to produce, when to market it, and when you have to pay bills. Having your numbers in a format that you can make timely informed decisions with, puts you in control. You tell your money where to go, not vise-versa.

 

You earn money or borrow it:

Where the money goes can have numerous answers, but the question “where does the money come from” can usually be boiled down to three answers. Money is earned, borrowed, or gifted. Most of us don’t have to worry about the gifted or inherited answer, so focus on earning and borrowing. Earning money is making sure the business is profitable. Borrowing money is making sure the bills get paid on time if production isn’t quite ready to be turned into cash yet. In production agriculture, profit and cash flow and taxes can be disconnected by several years due to timing of sales and purchases. Working the cash flow and comparing to actuals will ensure a proper balance of knowing where the money came from and where it went.

 

Money will slip through your fingers when you aren’t careful with it:

Practice makes perfect when it comes to completing the cash flow. Just start. Start with a budget and compare what goes through the checking account. Make sure those two numbers are relatively close and keep moving on if they are. If there is a disconnect, ask why, why, why, multiple times. Make sure what you think is going through the checking account is actually going through the checking account.

Embrace, Understand, and Act:

Working your numbers is a multi-step process. First, just knowing and embracing your status quo numbers is the foundation. Usually your gut instinct will tell you if they are accurate (if it is too good or too bad to be true, you are most likely right). Second, understand those numbers and how they are all related. Once the numbers are known and understood, the third step is to do something about them if you want different results.

 

To get a head start and have confidence in your numbers for next year, I encourage you to attend our Economics Intensive in Denver on December 17-19, 2025. It’s not just about the numbers though. Uninterrupted time with your business team (most often your spouse) is almost invaluable. It’s hard telling how much money you might find in those few days.

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