Enhancing Economic Stability by Building Financial Resilience: A Model for Collaborative Learning Among Beginning Farmers in Southwest Wisconsin
In 2016 the group of farmers met three times, July, November and December, as outlined in the proposal. The first meeting focused on balance sheets, the second on cash flows and the third meeting was a discussion with 2 tax accountants to prepare for the 2016 tax season. Each meeting ran 2-3 hours and fostered interesting and diverse conversation on farm finances, personal finance management and tax awareness. Prior to the first meeting a survey was sent to the group to develop a baseline of financial knowledge of the group. See objectives for specifics on the baseline statistics.
All farms have purchased all hardware and software specified in the grant. Fearless Farm Finances and SARE’s Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural
Businesses have been supplied to all participants. Marie, Lauren and Eric have hosted meetings.
Prior to the first meeting in July a survey was developed and sent to the group to measure baseline knowledge, attitudes and behavior surrounding financial terms, level of comfort in making financial decisions and overall financial literacy.
Overall, the survey shows that there is variability within the group depending on the subject. Taxes in general seemed to be an area where most people in the group had little to no confidence. It also seemed as though people may understand certain terms and how to create financial documents, but lack the understanding to analyze their unique situation.
In addition, an open ended question was asked at the end of the survey. Responses are given below:
“Get a handle on the basics of financial management for our farm. Understand how to think about and fund investments. Start towards a point where we feel confident enough to file our own taxes”
“As we start our small business I want to avoid making financial mistakes that are avoidable. I want to feel confident when talking to bankers, lenders and investors and ensure that I am making the most educated decisions possible”
“…More of the day to day financial management aspects [of farm financials]”
“A clearer picture of where the farm needs to go financially to support our family, allow my husband to quit his job and join me in making our income from the farm in various ways”
“Find out if I need cash flow and balance sheets. Also, the ability to evaluate different farm enterprises for profitability”
As the meetings continue with various experts and advisers throughout 2017 we should be able to answer these questions. Already, farmers have expressed gratitude and further understanding of financial terms.
The group met 3 times, as scheduled, but changed the order of the meetings slightly to take advantage of the tax preparation meeting before the end of the tax year. This switch allowed the farms to compile their earnings and losses before the end of the tax year, giving them time to make any adjustments recommended by the tax adviser.
In the first meeting Paul Dietman provided a detailed review on balance sheets. Prior to the meeting each farm completed a balance sheet to reference during the meeting. Not only did Paul explain how to complete a balance sheet, but also how he, as an adviser, uses balance sheets to draw conclusions about a farms financial status. On the outset I think most of the group thought they understood a balance sheet, but as the meeting progressed it was obvious that there were intricacies that required edits and further understanding.
The second meeting built off of what was learned in the first meeting and expanded into monthly and yearly cash flows and cash flow analysis. Again, Paul walked the group through the detailed cash flow example that he provided as a starting point. As each farmer is in a different place in business development, we were all able to share how we as individuals managed to cash flow (or not!) our businesses and farms. It was most interesting to learn how personal, or what we thought of as personal finances can get mixed into cash flows, as opposed to balance sheets which are much more farm focused.
The third meeting was meant to prepare the group for tax season and hopefully stave off any unforeseen tax liabilities prior to year’s end. This was a lively discussion in and the around the schedule F and the schedule C as it relates to the standard 1040 tax form. With focus on depreciation, various forms of incomes and expenses, as well how to classify certain expenses and incomes, this discussion generated more questions then could be answered in a 2-hour session. Many, if not all the farmers in the group are going to be taking advantage of the grant funds available for individual consulting sessions with tax advisers and accountants. Although the group is diverse, many of the tax strategies are useful for all types of production. It was also interesting to hear how others have dealt with tax liabilities in the past. The session also brought to light how each tax adviser may interpret tax laws differently. It was this realization that made it all the more important for individuals to understand how their taxes are done and have the financial literacy to ask the right questions of their advisers.
Impacts and Contributions/Outcomes
Generally, the group has already become more proficient in general financial literacy, as is displayed by the questions and dialogue during the first 3 meetings. Several of the farmers have stated that they already feel more comfortable talking with FSA loan officers, their mortgage holders, and their banks about financial issues. Once the meetings have finished at the end of 2017 it will be interesting to see how individuals confidence around financial issues has improved.
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