A strong relationship with your bank and your banker is an important part of a successful farm operation. I sometimes hear farmers mention they were disappointed with the level or with the speed of service they received from their banker. This sentiment can arise for many reasons, but there are measures you can undertake to cultivate a high-quality relationship, and together with your banker, ensure a rewarding relationship in the future.
Solicit feedback
Your banker likely deals with many farmers and accordingly has expertise in areas such as business structure, forecasting, and succession planning. In addition, banks have other well-established resources including investment specialists, cash management specialists, and estate planners who can help you with your business plans and future success. Asking questions and soliciting feedback will yield valuable ideas about your business and finances. This will help your banker better understand your situation and provide solutions tailored to your farm.
Your banker is a resource well beyond a provider of capital. To maximize your banking relationship, take advantage of your banker’s experience and expertise. In addition, make a point of meeting your banker’s manager. This is another excellent resource available to your farm and a point of contact should your banker be unavailable. As your farm grows and changes over time, your banker’s access to and understanding of a host of financial products and services will be a great asset.
Read Also
Riding the tariff rollercoaster
Farmers are accustomed to roller-coaster years. But the current geopolitical windstorm is something else entirely. On his cattle operation near…
Seeing their customers flourish is the most fulfilling part of any banker’s job. By making progress on these four strategies, together with your banker you’ll develop a strong and full banking relationship to help your farm succeed now and in the future.
Provide accurate and timely information
A strong banking relationship is built on a great understanding of your farm business. Providing accurate and timely information allows your banker to develop familiarity with your operation and plans. Often, this comes from reviewing financial statements, business plans, farm performance reports, and conversations with the farmer. High-quality information allows the banker to perform analysis and make decisions with more clarity and greater speed. It also conveys your strong farm management expertise. In addition, your banker will review the farm business to understand any risk that might arise throughout the relationship.
Examples of high-quality information include:
- Accountant-prepared review engagement financial statements (e.g. balance sheet, income statement, and detailed inventory valuations).
- Farm business plan, cash flow projections, and cost-of-production budgets for the coming year (e.g. crop plans, livestock sales, input cost and yield forecasts).
- Capital acquisition plans (highlight key capital assets your farm plans to acquire over the next three to five years).
To facilitate a timely annual conversation, this information should be available 90 days after your fiscal year end. For transactions and funding needs occurring at other times, this information along with up to date interim financials should be available.
Review this information
Often, farmers provide their bankers with quality information but they haven’t spent enough time reviewing the information themselves. Financial statements, business plans, and cost-of-production budgets are excellent management tools that you should review regularly to identify successes and areas for improvement. Your banker will have questions about specific entries and notes contained in these statements. Spending time reviewing the statements prior to meeting with your banker will allow for an in-depth discussion and provide an opportunity to ask for your banker’s opinion.
Communicate often
Advisers, including your banker, can only help you if they are aware of your short- and long-term plans. In most cases, bankers review your farm financial position on an annual basis. This conversation is an excellent opportunity to discuss your plans and priorities for the coming year and to discuss long-term goals. If your goal is to purchase a new farm or upgrade equipment, share this with your banker. It will allow them to offer solutions or adjust your banking and financing products to make these acquisitions. However, the relationship shouldn’t be based solely on one annual conversation. Regular contact throughout the year will help ensure that your banker is well informed about your farm and can help improve your banker’s ability to deliver high quality service in a timely manner.
