John & Susan Merrell
41390 Hwy 226
Scio, OR 97374
503-394-3790
503-551-7219 (cell)
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Financial Plan

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The Financial Plan is, of course, an integral part of any business plan. Financials should be considered to be living documents. Successful businesses will normally take a formal look at their financial documents at least every 6 months, updating them as necessary. Fixed and variable costs have a way of changing over time, usually to the disadvantage of the owner, and startup assumptions are not always accurate.

  • Income Statement - Most recent and projected statements of farm income and expenses
  • Cash Flow Summary - Summary and/or graph of projected cash flow requirements for a year of operation, including annual, monthly or quarterly budgets
  • Balance Sheets - Most recent and projected balance sheets or net worth statements, including farm assets, liability and equity
  • Capital Sales, Purchases - machinery, land and/or buildings that will be bought and sold
  • Loan Summary - Summary of outstanding loans, mortgages, interest rates and payment schedules
  • Financial Performance Indicators - Measures of liquidity, solvency, profitability and efficiency
  • Risk Assessment - Effects that market downturns or production setbacks could have on the farm. Risk managements tactics
  • Contingent Liabilities - Potential liabilities, including indebtedness of others, possible litigation and tax implications
  • Historical Prices - Charts or graphs of prices over the past few years (Note, historical prices on alpacas may not provide an accurate gauge for future prices)

Business Plan Financial Documents

The net worth statement, also known as the balance sheet, shows the condition of the business as of a fixed date (usually at the close of an accounting period such as the tax year). This is a backwards look at the business and where it has been.

However, the figures used here happen to be the same ones that will be used in developing:

  • Pro Forma Cash Flow Statement (Budget)
  • Three Year Income Projection
  • Projected Balance Sheet
  • Break Even Analysis

The categories reflected in these forms are taken directly from information that will be required for a farm tax return. This should reflect a pretty comprehensive list for figuring income and expenses, whether one is currently operating a farm or simply exploring the opportunity to do so.

Net Worth Statement

Farm Assets

Cost
Value
Market
Value

Farm Liabilities

Market
Value
Checking and savings accounts     Accounts Payable  
      Farm taxes due  
Crops held for sale or feed     Current notes and credit lines  
Investment in growing crops     Accrued interest - short  
Commercial feed on hand     Accrued interest - fixed  
Prepaid expenses        
Market livestock     Due in 12 months - fixed  
Supplies on hand        
Accounts receivable     Other current liabilities  
Other current Assets        
Total Current Assets     Total Current Liabilities  
Unpaid co-op distributions     Notes and contracts, remainder  
Breeding livestock     Machinery  
Machinery and equipment     Land  
Buildings and improvements        
Farmland        
Farm securities, certificates        
Other fixed assets     Other fixed liabilities  
Total Fixed Assets     Total Fixed Liabilities  
         
a. Total Farm Assets     b. Total Farm Liabilities  
         
c. Farm Net Worth
(a-b)
    Current Assets/Current Liabilities = ______ Current Ratio
     
d. Farm Net Worth Last Year        
      Total Liabilities/Total Assets = _____ Debt-to-asset ratio
e. Change in Farm Net Worth
(c-d)
   
Personal AssetsPersonal Liabilities
Bank accounts, stocks, bonds   Credit cards, charge accounts, other loans  
Automobiles, boats, etc   Automobile loans  
Household goods, clothing   Other loans, taxes due  
Real estate   Real estate, other long-term loans  
f. Total Personal Assets   g. Total Personal Liabilities  
h. Total Personal Net Worth
(f-g)
  Total Personal Liabilities/Total Personal Assets = _____ Debt-to-asset ratio
i. Total Net Worth Market Value (c+h)  

Net Farm Income Statement

Income

Cash Income Income Adjustments Ending Beginning
Sale of livestock, other bought for resale   Crops held for sale or feed    
Sales of market livestock, grain, produce   Market livestock    
Cooperative distributions paid   Accounts Receivable    
Agricultural program payments   Unpaid co-op distributions    
Crop insurance proceeds   Breeding livestock    
Custom hire income        
Other cash income   Subtotal of Adjustments b. ____ c. ____
Sales of breeding livestock   d. Value of Home Used Production  
a. Total Cash Income   e. Gross Farm Revenue (a+ +b-c+d)  

Expenses

Cash Expenses   Expense Adjustments Beginning Ending
Car and Truck expenses   Investment in growing crops    
Chemicals   Commercial feed on hand    
Conservation expenses   Prepaid expenses    
Custom hire   Supplies on hand    
Employee benefits     Ending Beginning
Feed purchased   Accounts payable    
Fertilizer and lime   Farm taxes due    
Freight, trucking   Accrued interest    
Gasoline, fuel, oil   Subtotal of Adjustments g. ___ h. ___
Insurance    
Interest paid   i. Depreciation  
Labor hired   j. Gross Farm Expenses (f+g-h+i)  
Pension and profit-share plans    
Rent or lease payments    
Repairs, maintenance   k. Net Farm Income from Operations (e-j)  
Seeds, plants    
Storage, warehousing    
Supplies purchased   l. Sales of Farm Capital Assets  
Taxes (farm)   m. Cost Value of Items Sold  
Utilities   n. Capital Gains or Losses (l-m)  
Veterinary fees, medicine, breeding    
Other cash expenses    
Livestock purchased    
f. Total Cash Expenses   o. Net Farm Income (k+n)  

Statement of Cash Flows

Cash Farm Income and Expenses (Operating)Cash InflowsCash Outflows
Total Cash Income (line a, Net Farm Income Statement)    
Total Cash Expenses (Line f, Net Farm Income Statement)    
Capital Assets (Investing)
Sales of Capital Assets (Line l, Net Farm Income Statement)    
Cost of Purchases and Trades    
Loans (Financing
New Loans Received    
Principal Paid    
Nonfarm
Nonfarm Income (wages, rents, interest, etc.)    
Nonfarm expenditures (family living, income tax, etc.)    
Cash on Hand (Farm and nonfarm cash, checking, savings)
Beginning of Year (Net Worth Statement)    
End of Year (Net Worth Statement)    
Total    

If all cash transactions have been included correctly, the totals for the two columns should be approximately equal.

Statement of Owner Equity

 Cost ValueMarket Value
a. Farm Net Worth, Last Year
(Line d, Net Worth Statement)
   
b. Change in Market Value of Capital Assets (net of depreciation)
(Line e Net Worth Statement, market value ___ - cost value ___)
   
c. Net Farm Income
(Line o, Net Farm Income Statement)
   
d. Net Nonfarm Withdrawals
(Statement of Cash Flows, nonfarm income ___ - nonfarm expenditures ___ - value of home used production ___. line d , Net Farm Income Statement)
   
e. Farm Net Worth This Year
(Line c, Net Worth Statement)
   

Line e should be equal to the sum of lines a, b, c, and d.

 
Alpaca Sales

"...the money he gets hold of; he never gives me a cent. This is the only gown I've got, except an old alpaca."

Horatio Alger
Helping Himself
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