Why Use Financial Management?
Financial Management was designed to make the complicated process of planning and communicating with lenders easier. When you’re done you’ll have:
An Annual Budget that can be analyzed or dissected in many ways;
A Lender Ready Business Plan that can you can use in talks with your lender
A strong foundation to make smart financial decisions with
Because setting up Financials for the first time can take a fair amount of time, we recommend splitting your efforts into three work sessions:
Advanced Planning - building on your work in the Planning module by adding other costs, revenue streams, and sales plans
Set Up Organizers - Adding Land Agreements and Loans
Take Action - Generate reports for Stakeholders and others
As you use these articles, make sure to review the “Prerequisites and Resources Needed” for each session before starting.
Advanced Planning
Prerequisites and Resources Needed:
Before beginning Advanced Planning, make sure you’ve already finished everything in the Planning module - creating Activity Templates, Crop Plans, and Field Plans. Having a Current Income Statement on hand will speed up the process.
For Advanced planning, setup the following:
The first step in making an Annual Budget is making sure you’re set up the way you want by entering in Categories (of costs) and Creditors.
These three schedules will be used to establish your
non-direct expenses in the Overhead Plan, your non-farming revenue in the Other Revenue Plan, and your non-farming expenses in the Owner Expense Plan.
Once you’ve made your Plans, you’ll want to come back throughout the year and
update the schedules with Actuals; these will populate your Profit & Loss, Budget Variance, and other reports.
Set Up Organizers
Add your Loans, Leases, and Lines of Credit into Conservis to capture all your debt services, which will pull through to financial reports and your Cash Flow Forecast.
Prerequisites and Resources Needed:
Before you begin, make sure you have already finished everything in the Planning Module, and the Advanced Planning section (see above). Have Land Agreements and Loan/Lease Information with you before you begin.
To Set Up Organizers, complete the following:
Add your Loans, Leases, and Lines of Credit into Conservis to capture all your debt services, which will pull through to financial reports and your Cash Flow Forecast.
Create Land costs to capture all your land agreements in one spot. The costs will be tied to your actual fields and pull through to financial reports accordingly.
Just like your Schedules’ Actuals, it’s important to add your debt services’ Actual
Payments into Conservis on a regular basis so that your Profit & Loss Variance reports are accurate and useful.
Take Action
Now that you have setup the building blocks of your Financial Management Tools, it is time to bring your financial data together with your agronomic data and use your data as an asset.
Prerequisites and Resources Needed:
Before you begin, make sure you have already finished everything in the Planning Module, Advanced Planning section, and you have Set Up your Organizers like loans and leases. Resources needed are a current Budget (if applicable), Land Agreements, Loans/Lease Information.
Take Action in the following ways:
An Annual Budget is created by combining together everything you’ve made so far - you can select relevant plans, schedules, and organizers to build an all-encompassing budget.
In general (with a few exceptions), these reports focus on the Direct Costs from the Field Plans attached to your budget.
These reports look at your entire budget, rather than only direct inputs.