As many farmers continue to navigate a difficult economic environment, understanding the financial health of their operations has become increasingly important. While many producers complete financial statements to satisfy their lenders, one agricultural attorney says those records should be used as management tools that help guide business decisions throughout the year.
Austin Peiffer, an associate attorney with Ag and Business Legal Strategies, says regularly reviewing financial records provides a clearer picture of how an operation is performing. He says balance sheets and cash flow statements can reveal whether a farm is generating profits through normal operations or relying on other sources of income to stay afloat.
Peiffer says producers should dig deeper than overall farm income by evaluating each enterprise on its own. That includes understanding production costs, machinery expenses, interest costs, and whether individual rented farms or business ventures are truly contributing to the bottom line. He says identifying those strengths and weaknesses can help producers make informed decisions before financial pressures become more severe.
Peiffer says financial records shouldn’t simply be filed away after they’re completed. He says regularly reviewing the numbers allows producers to look ahead, anticipate challenges, and make adjustments before lenders or other financial pressures force difficult decisions.
