cash flow – Growing Farm Profits | Improving Farm Business Performance™ https://www.growingfarmprofits.com Kim Gerencser - Improving Farm Business Performance in Saskatchewan and Western Canada. Wed, 21 Nov 2018 20:52:21 +0000 en-US hourly 1 https://wordpress.org/?v=4.4.30 Facets of Growth https://www.growingfarmprofits.com/facets-of-growth/ https://www.growingfarmprofits.com/facets-of-growth/#respond Tue, 24 Apr 2018 07:30:02 +0000 http://www.growingfarmprofits.com/?p=1386 It’s been said that we should think of our business like a tree…
“What is a tree always doing?”
“Growing.”
“If it’s not growing, what is it doing?”
“Dying…”

The analogy ends there. A tree can only grow one way: bigger. Our business must grow many ways.

“Better is better before bigger is better.”

-Danny Klinefelter, Professor and Extension Economist, Texas A&M University

Over my nearly 15 years as a lender and business adviser, I have seen dozens of examples of businesses that grew in only one way. These businesses are not industry specific, they are quite agnostic actually. From construction to farming, from trucking to consulting, many businesses drive themselves straight into the arms of failure simply because they overlooked getting better before they rushed out to get bigger.

Facets of Growth 1The graphic represents a snippet of the numerous facets that drive growth. All have a significant effect on the success of growth aspirations. This graphic is certainly not exhaustive; we are merely dipping our toes in the water. However, each spoke in that wheel has numerous sub-topics, and like a diamond, the many facets have varying purposes, importance, and brilliance.

RE: Customers – How can you grow your customer base? What do your customer like about you? What do they dislike? How do customers find you? How do you find them?

RE: Product/Service – What is your product or service? Is demand growing or shrinking? Which is your link in the value chain (IE. do you manufacture the raw product or do you retail to the final user, or somewhere in between?)

RE: Finance/Cash Flow – Are you financially strong enough to support and sustain the growth you desire? Will the growth you desire help or hinder your cash flow? Can you access the financing you need?

RE: Human Capital – Have you built a team of highly valuable people who drive results in your business? Will your business operate just fine in your absence? Do you people have the ability and desire for more responsibility?

RE: Information Management – Do you have systems in place to provide you with current and accurate information readily available anytime, specific to working capital, accounts receivable & payable, inventory, days to cash, etc?

RE: Management Capacity – Do you, as the manager, have the capacity to literally handle the growth you desire? What skills do you have that are better used in another part of the business? What skills are you lacking in your current role?

Seventeen questions related to six facets of growth; if you were to answer them with brutal honesty, is there room to improve on any of them? Is there opportunity “to grow”? If it is true that better is better before bigger is better (HINT: it IS true) then we’ve just provided you with six major factors in your business where growth can occur. There are more, but if you’ve looked after these first 6, the results will amaze you.

Plan for Prosperity

Growth is not a result or a destination.
It is a process.
It is a mindset.
It is a culture.
It is complex.
It is difficult.
It is worth it.

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Avenues to Growth – an Introduction https://www.growingfarmprofits.com/avenues-to-growth-an-introduction/ https://www.growingfarmprofits.com/avenues-to-growth-an-introduction/#respond Tue, 27 Mar 2018 07:30:47 +0000 http://www.growingfarmprofits.com/?p=1359 There are many tactics that can be implemented to achieve growth in your business. Listing them right off the hop would be meaningless, because first we must understand your goals.

What is it you are trying to achieve in business? Why are you in business? As Michael Gerber wrote in The E-Myth Revisited, “the problem is not that the owners of small businesses don’t work; the problem is that they’re doing the wrong work.” Gerber has built a career and a successful enterprise on breaking down why most small businesses fail. In my opinion, it is summed up nicely in what Gerber calls the Fatal Assumption.

The Fatal Assumption is: if you understand the technical work of a business, you understand the business that does the technical work. And the reason it’s fatal is it just isn’t true.  The technical work of a business and a business that does that technical work are two totally different things!

Michael Gerber – The E-Myth Revisited, page 13

So, if the reason you’re in business is because you are an expert at the technical work being done in your business, you may be wondering why your dreams and aspirations of growth, wealth, and freedom haven’t transpired as imagined when you took the leap.

Business is complex. There are many facets to successful business, far more than simply “doing the work.”
Understanding that is the first step.
Asking for help is the second step.

Because if you are an expert at the technical work of your business, then is it likely you’ve struggled managing the business which does that technical work.

And growth has possibly eluded you…
Or, at least the potential for growth that your industry may present?

As a former bank lender, and having had several conversations with current bankers over the last half-dozen years since I left banking, the sentiments are the same. One banker was recently describing a client, who was a good client but could be so much better, by saying, “He builds a helluva road, but can’t manage his cash to save his life.”

Change the character to either he or she, and change the activity to almost any technical work. She/He:

  • Builds a helluva road,
  • Installs a helluva wiring system,
  • Designs a helluva house,
  • Welds a helluva bead,
  • Grows a helluva crop,

…the list can go on and on.

Just doing the work will grow your business to a point, but that point is reached when you, as the owner/manager, run out of capacity.

Dr. David Kohl spoke recently in southern Saskatchewan. He described how success requires alignment of your expertise, your capacity, and your market.
Clearly, you have expertise or you would likely not be in business.
If you operate in a market that is hungry for your product or service, then growth is ready for the taking.
Is your capacity is sufficient in ALL areas that need to be covered in order to sustain growth: management, finance, reporting, staffing, logistics, facilities & equipment, etc?
(**Did you notice that facilities & equipment was found at the END of that list?  That is symbolic.)

All too often, the “technician” owners put emphasis on the facilities & equipment because that’s where their expertise is found. It’s why the “technician” owners are more apt to fail. Getting additional equipment is the easy part; managing the cash flow, bankers, and staff is the hard part.

So in this Introduction to the “Avenues to Growth”, we have described that:

  1. You need alignment of your expertise, your capacity, and your marketplace;
  2. You need clarification of your reason for being in business; and
  3. You must define your business goals.

Plan for Prosperity

Over the coming weeks, we will be exploring the Avenues to Growth in greater detail. The explicit certainty in any growth plan is that growth must be intentional. Accidental growth or fortuitous growth is not sustainable unless the owners & management team conduct a postmortem on how and why the growth occured so that lessons can be learned, mistakes not repeated, and good decisions leveraged further in the future.

The other explicit certainty to growth: there are many avenues to get there, none are a straight line, and there is no “Easy Street.”

 

**The featured image is a screen shot from a Google street-view of Fort Wayne, Indiana. In a weird twist of irony, Growth Avenue in Fort Wayne is a dead end street.

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Contrast https://www.growingfarmprofits.com/contrast/ https://www.growingfarmprofits.com/contrast/#respond Tue, 02 Jan 2018 07:30:11 +0000 http://www.growingfarmprofits.com/?p=1278 Did you ever wonder how so much expansion is going on during what is supposedly challenging economic times?

In this part of the world, in fact in this part of Canada, we are experiencing economic growth that is far less than we’ve enjoyed over the last decade. Government spending has been reduced provincially, and the federal government deficit has grown exponentially; we were teased with drastic changes to our federal business income tax structure; we’re paying higher levels of consumption tax; unemployment has grown; overall confidence has declined.

And yet, we continue to see businesses growing, we see new construction in housing, commercial, and industrial levels, consumers continue to buy new cars and take vacations. On Boxing Day, my thermometer read -32 Celsius but there was a line up outside the doors of the Visions Electronics store prior to their 6am opening. How tough can these times really be?

Notwithstanding the socio-economic challenges that our society faces (none of which I am trying to discount here), behavior would indicate that the “tough times” aren’t as tough as we’re being led to believe.

Contrast the difference between 2 businesses in the same industry: both make widgets, both have sales forces, both face the same challenges of staying relevant in the sleepy industry of widget production.

Company A wants to corner the market and pursues a mission of expansion that leans hard on the idea that “bigger is better,” and expecting it to lead to greater efficiency, sales, and profits. Company A increases debt and increases cash flow spending on capital assets, technology, and marketing to fuel its expansion aspirations.

Company B recognizes the truth in the adage “Innovate or die.” While the widget production industry is sleepy, Company B knows that the status quo is not sustainable. Five years ago, Company B developed a 5 year plan to position itself to be an innovator in widget production. It carefully managed margins and cash flow so as to create a “war chest” of resources.

Which company is building a new production facility in 2018? Which company is at risk of losing not only its market share, but its best people,  to its competitor? Which company will blame the tough economic times for the decline of its business?

The best businesses, and it doesn’t matter which industry they are in, the best businesses plan. They plan for cycles, growth, innovation, and the unforeseen (like the 4 D’s: death, divorce, disability, disagreement.) Businesses that do not plan leave themselves at the mercy of the market, the fickle nature of consumerism, or “tough economic times.”

Plan for Prosperity

Planning, in and of itself, does not guarantee prosperity. Even execution of the best plan does not guarantee prosperity. But in contrast to your competitors who do not plan, who make decisions based on short term perspective and emotion, or who are happy just floating along, there is a clear and obvious line separating the grain from the chaff.

Which side of that line do you want to be on?

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Cash, Growth, and Misplaced Priority https://www.growingfarmprofits.com/cash-growth-and-misplaced-priority/ https://www.growingfarmprofits.com/cash-growth-and-misplaced-priority/#respond Tue, 19 Dec 2017 07:30:46 +0000 http://www.growingfarmprofits.com/?p=1268 It’s been said many times by many pundits that “cash is king.” If you are a regular reader of my weekly commentary, you’ll know that I am not one who abides by that line of thinking because Cash Isn’t King. It’s the ACE!

However, GROWTH is King!

Growth is King and Cash is the Ace. What a tandem! It’s no wonder that in Texas Hold ‘Em poker, an Ace-King is known as “Big Slick.”

Recall that growth is not just about size and scale. Growth takes many forms; successful businesses “always grow, and grow all ways.”

The misplaced priority is when business pursues growth (expansion) at all costs, when it puts growth (expansion) above cash. I’ve seen businesses “grow” themselves to the brink of bankruptcy…

In an effort to spread out overhead costs, many businesses are driven to scale up. If rapid expansion is undertaken while in a weak financial position, the business has just been weakened further.

Cash is required to support any expansion plans. Expanding will not fix an insufficient cash position.

To Plan for Prosperity

Expansion plans must be carefully drawn up to ensure sufficient resources are available to support the goal. Expanding with insufficient resources, especially cash, can accelerate the decline of your business.

 

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Test Your Outlook https://www.growingfarmprofits.com/test-your-outlook/ https://www.growingfarmprofits.com/test-your-outlook/#respond Tue, 24 Oct 2017 07:30:44 +0000 http://www.growingfarmprofits.com/?p=1200 Price vs. Cost

*The following three lines are excerpted from Seth Godin’s Blog, October 16, 2017*

Price is a simple number. How much money do I need to hand you to get this thing?
Cost is what I had to give up to get this.
Just about every time, cost matters more than price, and shopping for price is a trap.

Does what Godin writes above strike a chord with you? When I hear of farmers selling out their long time input supplier to buy fertilizer for $5 per metric tonne cheaper from the dealer 20 miles down the road, I can easily understand that this is someone who does not understand price vs cost.

Expense vs. Investment

Too often there is confusion about what constitutes an expense and what constitutes an investment. An investment will provide a return over what you’ve paid, an expense will not.
Examples of investments are crop inputs, land, hired help, and quality advisors.
Examples of expenses are repairs, fuel, and equipment.
Sadly, when profitability is at risk, the first place many farmers look at is what falls under investment.

Price vs. Value

Price is what you pay.
Value is what you get.
And while it seems simple to distinguish one from the other, when emotion enters the equation we find that value is often seen where it does not actually exist.

Profit vs. Cash Flow

When I was still farming, the first year that dad wasn’t actively farming on his own any more and had rented us all his land, I was negotiating with him on when he wanted to get paid the rent (in the current year or after January 1). When he offered to defer to the new year since he had enough old crop sold already, I thanked him while admitting that it would help us since we were tight on cash for the next couple months. His reply was, “I thought you said this farm was profitable.” I told him it was, yet he wasn’t able to recognize that even though we weren’t flush with cash at that moment, we were profitable.

Often times when working with clients, I am offered a projection that they might have built on their own. Whether they call it a profit projection or a cash flow projection, it usually is a combination of both: it contains cash flow items like loan payments as well as expense items like (non-cash) depreciation. Doing so makes the result of the exercise look much worse that it actually might be.
Profitable businesses run into cash flow challenges at times; unprofitable businesses run into cash flow challenges most of the time. To rectify the issue, one must first know whether the problem is profitability or cash flow.

Problem vs. Opportunity

Recently, I read an article written by a farm advisor that described the panic of a client who hedged 30% of his new crop production at a profitable price. The panic was because the market had moved higher. His view was that this was a problem, but the advisor patiently guided him through the reality that this was actually an opportunity to price more crop.
The producer viewed the situation as a problem because he felt he “missed out” on selling for a higher price.  The reality was that he was already priced at a profit (a meager one, but still a profit) and now had the opportunity to price in even more profit. Sadly it seems he would have been happier if the market had moved down because his hedge would have been even more in the money despite the fact that the remaining 70% of his new crop was unpriced and might then be unprofitable…

To Plan for Prosperity

Objectivity can be difficult to maintain when making business decisions. I know; occasionally I have the same difficulty in my own business, and that is why I have a business advisor.

As entrepreneurs, we get caught up in what we’re doing, what we’re trying to solve, or what we’re working to create. We can get so engrossed in our own ideas that we sometimes fail to see what is blatantly obvious, that which can bring faster results, a more desirable outcome, or just less stress. Garnering the perspective from someone outside our business is a great way to test our outlook.

 

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Is Profit a Part of Your Strategy? https://www.growingfarmprofits.com/is-profit-a-part-of-your-strategy/ https://www.growingfarmprofits.com/is-profit-a-part-of-your-strategy/#comments Tue, 17 Oct 2017 07:30:36 +0000 http://www.growingfarmprofits.com/?p=1190 Recently I met a confident cattleman who clearly displayed zero interest in what I do for clients and how they can benefit. He was very direct in describing his costs, and knew his break-even on his animals (right to the paperclips.)  He received a compliment from me on being ahead of many of his competitors.

To test me (or so I think this is why) he asked what he should do with his heifers this fall. After admitting that I am not an astute cattle market advisor since most of my work with farms are grain farms, I asked what his thoughts were if he and I weren’t having this conversation. He said he’d keep them and only cull a handful of cows. Doing so would increase his breeding herd by one-third. This, at a time when we’re coming off a serious drought which has left feed stocks and pastures in tight supply and at premium prices.

He sold fed calves this fall for enough to make a tidy profit. In the same breath he bemoans the price insurance premium he paid this year. I wouldn’t have thought that creating enough profit from operations so as not to need risk management programs was a bad thing…

Further to his question about what to do with his heifers, I said that I’d first need to know where the market is headed by taking a look at the futures market for beef and for the Canadian dollar. This was a lead-in to ask him if he does any hedging. His response was, “No, we’re not on the right side to do that.” Puzzled, I asked him to explain. He described how “lots of guys out there hedge the dollar, price all their barley, and contract their sales…basically they’re doing everything to lock in a profit.”

I let that statement stew for a moment; I wanted his own words to sink in.

Then I just blurted out, “That sounds fantastic! Why wouldn’t everyone do that?”

There was no response.

It was at that moment that I knew there was no point berating the issue further. Here was a cattle operator who knew his costs but refused to use that knowledge to his betterment. There was nothing I could say in that moment that would lead him to take a different action.

To Plan for Prosperity

Profit is not a bad thing, it is a very good thing and business must do everything possible to maximize it. The story above is real, and more of the story includes a decision on whether this cattleman should pursue off-farm employment because the cattle alone aren’t providing sufficient income.

I’m puzzled at how off-farm employment along with the cattle herd simply creates more work and is an option being considered, yet more work to maximize profitability in the cattle herd (hedging strategy) isn’t work that is desirable.

Profit feeds your business, it feeds your family, and it feeds your ability to spend time with your family & on other things you enjoy.

Profit is not a bad thing, it is a very good thing.

Is profit a part of your strategy?

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Soil Testing Season https://www.growingfarmprofits.com/soil-testing-season/ https://www.growingfarmprofits.com/soil-testing-season/#respond Tue, 10 Oct 2017 07:30:20 +0000 http://www.growingfarmprofits.com/?p=1184 This is the time of year when soil probes all over the prairie are taking samples of the soil that provided the crop in the current year and will provide another crop next year. It’s an annual “check-in” to see what’s left.

It was the same about a year ago. We check what nutrient levels remain after harvest, consider what crop will perform best in each field next year, and begin to apply appropriate nutrients (following the 4R’s of Fertility: Right Source, Right, Rate, Right Time, and Right Place) in fall and/or in spring. The crop get’s sown, produce get’s harvested, and we check the soil again. Based on what we started with, what we added, and what the crop used to through the growing season, we compare to what is left in the soil to evaluate how efficient our fertility program was.

If it wasn’t as efficient as it could have been, we examine the effects on our production (moisture, heat, disease, insects, etc.) and we examine our own role in the process by questioning if the seed tool did a good enough job; how about the sprayer? Often time we use weather as the justification to acquire bigger, newer equipment to “get the job done faster.”

What if the entire industry, not just the progressive managers but the entire industry, used that same methodology in analyzing profit and cash flow? It might look something like this:

This is the time of year when spreadsheets all over the prairie are being used to tally up the performance of the business over the last growing season. We start with the working capital we had after last harvest, consider what crop will perform best based on your crop rotation and market outlook, and begin to project input costs and yield & price for each crop. We enter expected operating and overhead costs into a projection, and convert those projections to “actuals” as the year progresses. Once harvest is complete, we evaluate working capital again.

If profitability and cash flow was insufficient to meet expectations, we examine if operating costs stayed within budget or not (and why), we examine if overhead costs were projected correctly or if we let both operating and overhead “get away” this year. What did we not foresee? What did we properly plan for? Did we market appropriately?

The practice of soil testing compliments crop and fertility planning. These are crucial steps to take to create the most efficient plan. Remember, you need to produce at the lowest cost per unit possible. Period. Hard Stop.

The practice of checking financial performance is similar to keeping score. It would be awfully tough to know what adjustments need to be made during the game (growing season) without knowing the score along the way.

To Plan for Prosperity

It’s been said by agronomists that soil testing is “seeing what’s in the bank account” and they carry on in supporting that analogy by stating that no one would write a cheque without knowing what the bank balance is first. Sadly, there any many people who do both: write cheques without knowing what’s in the bank and plant crops without knowing what’s in soil. One won’t break you, the other could.

Knowledge is power. Knowledge comes from management. Management requires measurement. Test your soil (financial performance), because if you don’t measure it, you can’t manage it.

 

**Side note: the photo is from my farming days, and provides a glimpse into the soil I used to farm. I found it interesting to so clearly see the A, B, and C horizons in a single core. **

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Perspective https://www.growingfarmprofits.com/perspective/ https://www.growingfarmprofits.com/perspective/#respond Tue, 03 Oct 2017 07:30:44 +0000 http://www.growingfarmprofits.com/?p=1178 What do you want to accomplish between now and Oct 1, 2018?

If I had asked many of you that question one year ago, you might have provided a response that would make you cringe using the lens of today. Last year, may farms were suffering from excess moisture, and long drawn out harvest. On this date one year ago, there were millions of acres yet to be harvested in western Canada. If one year ago you were hoping for a hot dry 2017, well…you got it.

How has your perspective changed over the course of a year? What is affecting the change in your perspective? If you’re more concerned about short term fluctuations rather than big picture issues, such as a recent market correction versus the tax changes currently proposed by our federal government, then you’re probably looking down the hood of the truck instead of down the road.

If you’re more concerned about short term fluctuations rather than big picture issues, then you’re probably looking down the hood of the truck instead of down the road.

My best client relationship has evolved from our original work of clarifying Unit Cost of Production by drilling down operating and overhead costs, so that we are now pursuing 5 year expansion strategies and establishing tactics for handing off management activities as part of a transition plan that is still 5-10 years away.

In the next breath, when asked “What is the greatest challenge on farms today,” I regretfully cutoff whoever is asking the question by blurting out “cash flow.”

I see numerous farms who do not suffer cash flow challenges. They experience the same weather, the same markets, the same interest rates. Yet somehow these farms do not suffer under the same cash flow pressure. Why is that?

Perspective.

Successful businesses have a long term perspective. Those businesses recognize the variability in the aspects affecting their business that they cannot control (like weather, markets, interest rates), and as such, they prepare themselves and their businesses for what’s coming “down the road.”

Looking down the hood instead of down the road doesn’t give you time to prepare and react to what’s coming up ahead.

Here is an easy recipe to help prepare for what’s coming up “down the road”:

  1. Understand cost of production, right down to the paperclips.
  2. Get lean in how you manage your operating and overhead costs.
  3. Maintain modest personal drawings.
  4. Eliminate unnecessary assets and the debt they bring with them.
  5. Build working capital to a minimum of 50% of annual cash costs.

By implementing these 5 steps into your action plan before spring, you will instantly be miles ahead of your competitors one year from now.

To Plan for Prosperity

There is no crystal ball in my possession, so I cannot predict what is coming down the road. What I can tell you is that I have seen the effects of business cycles on the unprepared, I have seen the effects of poor perspective on the oblivious. Conversely, I hold great admiration for the business people who had the foresight to control all that they were able to control, including how they were affected by that which they couldn’t control.

What’s your perspective?

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What Do You Care About? https://www.growingfarmprofits.com/what-do-you-care-about/ https://www.growingfarmprofits.com/what-do-you-care-about/#respond Tue, 26 Sep 2017 07:30:21 +0000 http://www.growingfarmprofits.com/?p=1172 What do you care about?

In a conversation with a fellow business advisor recently, the topic was about how much demand for our services there would be this fall considering the drought, rising interest rates, a rising Canadian dollar, and volatile crop prices. He said to me, “The work we do is important; people need our help,” and then went on to say how he expects there to be significant demand from the marketplace for our financial advisory work.

I questioned whether the farming industry is “generally” ready to place enough importance on financial matters of cash flow, profitability, and leverage to create the demand he described. My experience is that there are pockets of business people who see the value and hire the help, but generally the financial woes faced at the farmgate have yet to cause enough pain to spur on action.

Change will only occur when the pain of change is less than the pain of staying the same.

It seems like there is always something more important.

His response, “People will tell you what is important, and very clearly too! It’s their behavior. Their actions show you very clearly what they care about most.”

Based on how farm equipment sales continue to be incredibly strong, despite challenges to cash flow and profitability, it’s not rocket-surgery to figure out what is a top priority among farmers…

Faced with a choice of one response over the other, how would you choose:
What do you care about?
a)
Ensuring a profitable enterprise for long term growth and sustainability
b) Having a modern/late model fleet of machinery

a) Investing in the crop that provides your income
b) Investing in an “asset” that is a merely a cost and reduces your profitability 5 different ways

a) Getting bigger
b) Getting better

Years ago (WAY back) when I drove a fuel truck for a living, one of my customers always needed significantly less heater fuel (fuel oil) than any other customer on the regular monthly top-ups during one particularly cold winter. It’s not that his house was that new or air-tight; it was not that he didn’t have the money to pay for the fuel (they were a wealthy family.) It was that, by his own admission, he “kept it as cool as possible in the house, about 64 (degrees Fahrenheit).” This was a family of 6, with kids ranging in age from 10-18, whose comfort was less important than money. By his behavior, it was clear what he cared about most.

To Plan for Prosperity

If you feel like you might be facing a choice this year as you evaluate your financial performance, you won’t be alone. Hard choices need to be made by business-people everywhere, every year, all the time. When considering what choice to make, first ask yourself “What do you care about”. When what you care about is clear, the strategy and the action become obvious.

If you are having difficulty defining what you care about, look at past behavior: it will paint the picture for you.

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Know the Signs https://www.growingfarmprofits.com/know-the-signs/ https://www.growingfarmprofits.com/know-the-signs/#respond Tue, 19 Sep 2017 07:30:25 +0000 http://www.growingfarmprofits.com/?p=1164 When you see a cow that is limping, you check her out to see what the ailment is. A prudent cowperson can quickly recognize foot-rot and will tend to the cow to make her well again.

When you see yellowing bottom leaves and/or thin, spindly plants in the canola crop, you know it is lacking nitrogen. If you see the signs in time, you can top dress nitrogen fertilizer onto your crop and see a positive benefit.

When we see a tire is low, we fill it.
When we see windows are dirty, we clean them.
When we find the level of fuel in storage is low, we order more fuel.
When cash flow is abundant, we spend it in ways we wouldn’t usually spend it.
Yet, when working capital is depleted, when cash flow is tight, or when profitability is dicey, we typically soldier on…doing what we’ve always done.

This makes no sense. The last two sentences above make no sense at all.

When the bank account is empty and the line of credit is nearly full, do you:
a) Apply for more credit, at your primary lender or elsewhere?
b) Evaluate your cash outflow to date and reexamine your plans for the rest of the year?

When working capital as slipped down so low it would barely cover the crop inputs loan, do you:
a) Analyze what caused the current situation?
b) Seek action to rectify your working capital position?
c) Both a) and b) ?

The case for “knowing the signs” is made by acknowledging the impact of each risk that is identified.

In the crop, the yellowing of canola leaves won’t spur any action if the risk to yield potential is not understood.  If the risk is understood, then an informed decision can be made to act or not act. If there is no effort put in to understanding the risk, then the decision to act or not act falls somewhere between apathy and laziness. Being ignorant to the specifics of the risk and its implications is no longer an excuse now that we have access to all of humankind’s knowledge in our pocket…

If you’re unaware of what are the signs of nitrogen deficiency in canola, if you’re unaware of what are the risks of foot-rot in your cattle herd, you are best to seek advice from an expert.

To Plan for Prosperity

The risks of maintaining insufficient working capital, and the risks from shortfalls in cash flow, are obvious to those of us who specialize in the financial side of business. We know the signs. We know what it takes to fix it. We know what should happen to ensure the situation isn’t repeated.

 

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