If it was a scientific technology that was adding as much capability to today’s farms as effective financial management, we’d all be quick to sing it’s praises.
We’d also have a pretty clear sense of how much value it was adding to the farm.
It’s an interesting exercise to think about it in terms of bushels per acre. What if we could actually see the returns from financial management (instead of wondering how much of our neighbour’s apparent wealth is actually real)?
Regardless, the point is that not only do today’s farms have technologies like GPS and herbicide tolerance that our parents couldn’t have dreamed of, we also have access to proven financial and business management strategies that are similarly advanced.
We now know about better processes, such as being more accurate with farm cost calculations and being on top of cash-flow projections, both for short-term needs and for two- to five-year forecasts.
Business management based on hunches gets you off to a poor start, and is unlikely ever to be competitive in today’s agriculture.
There’s no surprise in this for Country Guide readers, of course. But it’s worth setting down in black and white anyway, just to give us a sense of how far things have come.
Similarly, we understand today that farms need to run on return on assets, not simply asset accumulation, they need to identify the critical accounting ratios for their farms, and they need to measure their progress toward actionable objectives.
All of this takes financial acumen. More than that, it takes discipline. It doesn’t always come easy to find the time to do scenario planning, or to see that getting advice on your cash reserves or on your non-farm investments is likely to be as important to your farm as getting advice on tillage.
Which brings up another issue, because not only do today’s farmers have unprecedented access to proven strategies, they have better access than ever before to highly trained bankers, accountants and financial advisers.
None of this is meant to disrespect our elders. If they hadn’t made careful, astute decisions, today’s farmers wouldn’t be farming. But would their decision-making, with the pen-and-ink tools that they had available to them, keep you successful today?
Shrewdness added value then; it adds essential value now. But on its own it cannot be enough.
So the question is, how well are our farms embracing these new tools, and how well are they incorporating the benefits of financial advisers and on-farm meetings and the like?
My guess is that they are heading faster in this direction than anyone could have predicted 10 years ago. The world has changed. And again, farmers are leading it.
Are we getting it right? Let me know at [email protected].