As 2025 kicks off, many farm operations are coming off of a relatively poor profit year in 2024.When comparing to a few years ago, all producers are facing very tight profit margins, for the upcoming growing season.
Before meeting with your Ag Banker to renew your operating line of credit, it is important to get prepared. Having an accurate and up-to-date 2024 year-end farm balance sheet is critical. The more detail the balance sheet has on it, the better. Staying organized throughout the year with new land or equipment purchases, as well as inventory management, will make this feel like less of a chore, as the new-year rolls in.
The second document you should have prepared before your renewal is a 2024 year-end income and expense statement. This should be based on your actual sales of both livestock and grain, as well as any expenses for the year, or prepaid expenses for the upcoming year. Again, as much detailed information as you can provide, will assist in an accurate financial review.
Budgeting a cash flow for 2025 is also a necessity for renewal season, and often times the most important in small margin years. This 2025 budget outlook should include planned crop and livestock production for the year, including the marketing plan for sold or contracted inventory.
As a bonus, and for good financial practice, it is good to have a budget to actual expense comparison report for 2024. You should have had a projection completed in January for 2024, so comparing where your year-end cash flow ended up will show you how accurate you planned and operated your business over the last year. It is important to pay attention to the big differences that exist in crop and livestock income, as well as the various expense items. Make sure to determine an explanation for these differences, and analyze the adjustments needed for 2025.
Being prepared for your renewal conversation with your Ag Banker not only expedites the renewal process, but also allows your banker to truly dive into the numbers and help your operation succeed. The more accurate the financial information is that you provide your Banker, the better. This provides a confidence to your financial institution in your ability to manage not only the day-to-day functions of farming, but also the financial portion that is crucial for business success. You should consider your Ag Banker as an informal business partner who serves as a valuable resource in management decisions. Again, the more confidence they have in accurate financial information, the better they are able to serve you.
Is Renewal Season a good time to switch Ag Bankers?
YES!
If you are not happy with the service and the relationship of your current Ag Banker, renewal season is a great time to get established with a new institution. You are already gathering and reviewing your financial information, so while in that headspace it can be good to get a fresh set of eyes on your operations’ financials.
Here at Citizens State Bank, our Ag Team would be thrilled to set up a time to meet with you this renewal season. With over 145 years specializing in the agriculture industry, we are confident in our ability to assist you with your farm operation. Give us a call today, or check out our Ag Team on our website.
To hear more on Renewal Season, listen to this week’s Buzz on Banking with Vice President, Dennis Groezinger.
