Does the Implementation of Technology Improve Farm Profitability?

Agriculture and Technology

By:  C. Robert Holcomb and Joleen Hadrich

In 2017, the Minnesota State Colleges and Universities Farm Business Management Program, the Southwest Minnesota Farm Business Management Association (SWMFBMA), and the University of Minnesota Extension conducted a survey to identify management skills and tendencies of highly successful producers. 

This month, we will discuss how the use of technology in the farm operation affects profitability.  (Previous articles in the Top Farmer series can be accessed here and here.) Only 6% of all farms considered themselves innovators, adopting technology at its earliest availability.  Forty-five percent of the respondents consider themselves early adopters, making investments in new technology once proven by a small number of success stories.  This group does not consider themselves innovators though. 

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2019 National School for Beginning Ag Bankers

The FINPACK Team wants to alert you to an outstanding educational opportunity – the 2019 National School for Beginning Ag Bankers, being held June 24 – 27 at Black Hills State University in Spearfish, SD. CFFM has had a long relationship with this school, our staff is integral members of the teaching team, along with a talented group of seasoned ag bankers.  This school is an intensive program designed to train in all facets of agricultural lending with an emphasis on credit analysis, credit score, risk rating, problem loans, and group case study.

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Projections Training

FINPACK Online Training

We want all users to have a positive experience using the FINPACK tools.  Therefore, several training options are available to assist with learning the ropes of the new FINPACK Projection tool.

One of the training options for FINPACK is online training.  Each FINPACK tool has a learning module in FINPACK Online Training.  As you migrate to the 3-in-1 cash flow projection (FINFLO), know training is available and accessible for your use. These training modules have been updated to specifically address using the FINPACK Projections tool (FINFLO).

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Family Living Expenses Add Up

Family Living Expenses

When putting together customer cash flow projections for the coming year what amount of family living expense is appropriate?  Family living expense is unique to every household, but averages can be used as a starting point.  The FINBIN farm financial database is a great resource to assist with this question.  (The FINBIN database summarizes actual farm data from thousands of agricultural producers who use FINPACK for their farm business analysis.  The data in FINBIN is contributed by farm management education programs across the country.)

So, let’s take a look at the numbers.  Over 750 farm families keep track of detailed family living expenses in the database.  In 2017, a family of 3 spent $63,648 on cash family living expenses.  This amount includes expenses like food, health insurance, medical care, clothing, household supplies, utilities, and recreation to name a few.  Family living expenses obviously vary depending on family size, stage of life, spending habits, and benefits provided by non-farm employment.  When income taxes paid and personal capital purchases are added, an additional $21,508 was consumed in 2017, bringing total cash family living costs to $85,156 for that same family of 3. 

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Converting Legacy Projections

The Legacy Projection tools in FINPACK will be retired at the end of 2019. This includes the Annual Cash Flow Plan and the Monthly Cash Flow Plan. As you work on renewals in 2019, the FINPACK Team suggests you test out the new Cash Flow Projection tool found in Projections. Yes, there are a few changes to cash flow projections in the new tool, but by and large, we think you will appreciate many of the updates.    

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FINPACK Long Range Planning

FINPACK Long Range Planning

As you work with agricultural customers this winter, do you find yourself running multiple cash flow scenarios?  Are some farms wanting to compare major changes to their operation with their current situation?  Are farm customers then looking to you for advice and feasibility of these plans?  Instead of running multiple cash flow projections based on different scenarios, use FINPACK’s Long Range Planning tool FINLRB.  The Long Range Planning tool (FINLRB) is available as one of the FINPACK Projection tools for agricultural files. This projection tool allows you to compare multiple alternatives for a farm or ranch operation at one time.

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FINPACK Balance Sheet Worksheet

FINPACK Balance Sheet WorksheetGathering customer data for year-end analysis and credit renewal can be difficult.  FINPACK tries to assist with the process by providing a Balance Sheet Input Worksheet with the customer’s most recent balance sheet data for updating.  This tool is provided to the customer as a means to get current, updated balance sheet information for the current year.  This worksheet is one FINPACK tool to assist with customer renewals.

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Handling Trades on the Balance Sheet – Revisited

Trading machinery and equipment is common for all types of businesses.  FINPACK allows for streamlined data entry of capital purchases, sales, and trades within its different tools.  By entering extra detail on the FINPACK balance sheet, the details of these capital transactions can be brought into other FINPACK analysis tools, like Schedule F Cash to Accrual, Earned Net Worth Analysis, or Financial Analysis (FINAN).

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The Credit Renewal Process

The Credit Renewal Process - FINPACK‘Tis the season for credit renewals.  FINPACK has several tools to assist lenders with this process, from spreading, to financial analysis, projection preparation, and pulling the pieces of the credit analysis together.

In general, within FINPACK, the recommendation is to work down the left side file navigation to complete the credit renewal and analysis process.  Start with data sources, move to financial analysis, complete cash flow projections, and then pull everything together with the credit analysis tools.  With that being said, here is a bit more background on these tools and how they aid the credit renewal process. [Read more…]

Thank you!

Thank You, from the FINPACK TeamThe FINPACK Team would like to take a moment to thank all of you who joined us at recent events.  We had many users stop at the FINPACK booth at the ABA Ag Lender’s Conference in November.  Then in December, we appreciated all of the attendees at the FINPACK Lender’s Conference.  We sincerely enjoyed having the opportunity to interact with such a diverse group of partners at these events.  It’s always great to connect with long-time FINPACK users, to those who are just beginning to investigate FINPACK as a tool for future use, and everyone in between.  Our team is excited about the future developments of FINPACK, as was showcased at the Lender’s Conference.  Stay tuned for more information on these exciting additions to FINPACK!

Upcoming Events

Our team will also be at upcoming national lending conferences.  Find us in San Diego at the ABA Conference for Community Bankers in February.  In March, we will be in Nashville at the ICBA Live National Convention.  Stop by get your questions answered and learn more about FINPACK at both events.