Cl4-Lancaster Farming, Saturday, May 8,1993
Financial Analysis
From A Lender’s Perspective
Editor’s Note: This is the fourth of a seven part series to explain
how Farm Credit analyzes farm and ranch businesses. A different
aspect of financial analysis is addressed in each issue.
Cash flow planning helping you stay in control
As 1992 shapes up to be a tough economic
year for many farmers and ranchers, it's
more important than ever to maintain timely
financial control of your business. One helpful
tool to accomplish this task is a cash flow
statement.
Unlike an income statement or balance
sheet which provides information on
profitability or solvency on an annual basis
a monthly cash flow statement allows you and
your lender a means to assess the cash position
of your business and understand your true
borrowing needs within a more precise time
frame.
What is a cash flow statement?
A cash flow statement is simply a summary of
all cash sources such as cash receipts; capital
sales; non-farm income; new borrowings; all
cash outlays, including interest paid; capital
purchases: family withdrawals; and principal
payments.
In addition, the following should be moni
tored monthly for their cash flow impact:
seasonal planting and harvest require-
ments;
inventory buildup and subsequent seasonal
sales:
accounts receivable;
favorable selling terms;
unusual purchasing conditions;
purchase discounts;
real estate or income tax; and
capital expenditures
Monitoring these areas can help you chart
when you receive income, when you pay
expenses, and when you need money
consequently allowing you to determine
whether you need to borrow or reschedule
payments.
USDA Releases Pesticide Rule
HARRISBURG (Dauphin Co.)
USDA has released its final
rule on pesticide recordkeeping
requirements which went into ef
fect on May 1.
The Pennsylvania Pesticide
Control Act of 1973, which is ad
ministered by the Pennsylvania
Dept of Agriculture (PDA), al
ready requires pesticide record
keeping for private and commer
cial applicators.
PDA regulations for private ap
plicators require that the following
data msut be recorded for restrict
ed use pesticides: date of applica
tion, crop to which applied, field
of application, total amount of
pesticide used, name and ID num
ber of certified applicator, pesti
cide used (brand name and formu
lation), application rate, address of
application site and time applica
tion completed (when labeled with
a re-entry time).
PDA regulations for commer
cial applicators require that the
following pesticide record data
elements for all pesticide applica
, What should a cash flow statement
1 include?
There are many formats for a cash flow
statement, but a recommended version shows
four columns: projected monthly, actual
monthly, projected year-to-date, and actual
year-to-date. In addition, columns for
percentage deviation between projected and
actual monthly and year-to-date figures can be
useful in putting absolute dollar-value differ
ences into relative terms (i.e.. 25 percent can
be the difference between SIO.OOO projected
and $12,500 actual, or between $5OO projected
and $625 actual).
It's important to project and analyze
monthly cash flow so that you may capitalize
on opportunities or make adjustments should a
trouble situation arise. Yet. it’s also necessary
to compare year-to-date information to keep
isolated, abnormal deviations in perspective as
well as relate subsequent years' performances.
How does cash flow planning help
lenders?
A cash flow statement helps you and your
lender establish loans and repayment plans
that best fit your business cycle by pointing
out the fluctuations and resulting cash require
ments. In addition, this kind of planning
shows lenders that you have goals, a strategic
direction, and a sound plan for repayment of
debts and other commitments. A cash flow
statement is a business tpol for making
intelligent decisions about the direction your
operation will take. Without this type of
information, both producers and lenders can
only speculate about future business needs. <•
• Adapted from
Adding a Cush Floss Statement to the Tools of your
Tiade.' Bill Lipinski, Fmannal Partner, Spring 1992
Cash Floss Planning Keeps People out of Trouble,"
Jonas B Kauffman 111, Hoard's Dairyman
Next we will look at analyzing loan
repayments.
tions: date of application, total
amount of pesticide used, name
and ID number of certified appli
cator, pesticide used (brand name
and formulation), application rate,
address of application site and
time application completed when
labeled with a re-entry time).
Another requirement in the
USDA regulation is for commer
cial applicators to provide a copy
of the pesticide record to the cus
tomer within 30 days of an RUP
application. PDA intends to revise
its regulations to include this in
the future. However, the PDA re
quirements will not pertain to all
RUP applications, only to those
applications made in the produc
tion of an agricultural commodity.
Penn State Cooperative Exten
sion will be offering pesticide re
cordkeeping forms to all private
applicators that request them.
These forms are 814 x 11 sheets
that can easily be stored in your
filing cabinet Please call your lo
cal extension office for more in
formation.
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