|
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 Assets | Personal 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 Inflows | Cash 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 Value | Market 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.
|
