This post highlights the updated Farm Financial Scorecard as an easy-to-use resource to benchmark a farm’s financial position and performance against a standard set of ranges from vulnerable to strong.
Benchmarking, or comparing individual metrics to standards, drastically enhances the ability to leverage financial information. Understanding individual ratios for your farm is important, but understanding the strength of your farm’s financials is even more valuable. Having a tool to help with farm financial benchmarking allows you to more fully utilize your financial information.
About the Scorecard
The Farm Financial Scorecard is an easy-to-use PDF resource for seeing where the financial measures for an individual farm fall on a range from potentially vulnerable and concerning to strong. The full scorecard publication has two main components.
First, it provides a visual comparison (see below) of a particular operation’s financials versus the recommended ratio ranges, scoring from vulnerable to strong. This visual comparison also provides arrows to indicate the desired trending direction of the ratio over time. Second, the publication provides educational context for the user. It explains what the ratios mean and are measuring for the farm. Additionally, which financial statements the ratios comes from and how to calculate each of them is provided.
The set of ratios used in the scorecard comes from the Farm Financial Standards Council (FFSC)‘s Financial Guidelines for Agriculture. In fact, the recent update to the recommended ratios from the Council in part helped drive the update to the Scorecard. The Council moved from 21 recommended ratios and measures to 13 recommended ratios with the January 2022 update. With this update, the FFSC removed whole number measures from their recommended metrics since they are nearly impossible to benchmark. The Council also added some new ratios, including a Debt Coverage Ratio and a Working Capital to Operating Expense Ratio. Find more explanation on the changes to the Farm Financial Standards here.
Access the Scorecard
The Farm Financial Scorecard can be found here. The Scorecard was developed by the FINPACK team at the Center for Farm Financial Management in conjunction with the University of Vermont Extension. The Farm Financial Scorecard is a great tool. However, if you need more information on developing or interpreting farm financial statements, see this post from earlier this year.
