As things seem to be improving on the dairy price outlook, now is the time to take a look at management strategies to weather the next downturn, suggests Tim Dolan, University of Minnesota extension educator, Sibley County.
That will be much easier to say than to do. Cash flows will still be tight with inputs also on the rise. Every situation is unique but all have some similarities. One similarity at this point seems to be all who are still in business have an ability to manage in times of adversity, he notes.
So, how do you prepare for an uncharted future? There are only so many things that an individual can do in managing the dairy business. “The real challenge is to analyze all of the areas of the business that can be controlled, develop a list, and formulate a management control plan,” says Dolan.
Finances are an area that you can control to a point.
A well managed dairy will have a balance sheet that places debts of all areas (short term, intermediate term, and long term) into a plan that keeps all debt payments in a manageable range. This range will vary with production efficiencies.
If you have not looked at your balance sheet lately, there is no time like the present to get it out, study it, and make sure you understand the complete picture.
Have someone you consider knowledgeable in the business look at it as well. It never hurts to have another set of eyes scrutinize it. Ask questions if you do not understand any item of the balance sheet.
“Untapped ideas from someone else do not do you any good,” says Dolan.
Do a monthly reality-check of planned expenses vs. actual. “When I was in farm business classes, it was called a 'monitoring worksheet',” he explains. If you do this on a monthly basis, it is far easier to anticipate any needs or changes that may be necessary. Put this on your calendar for every month on the same day so you get in the habit of doing this.
Waiting until the year is over can be dangerous as it may be too late to take some steps to avoid problems or troublesome issues.
Source: University of Minnesota