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Financial Planning with FAST Tools

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Revolving loan calculator. Assist in calculating loan payments and schedules; ... Ratio Calculator. Designed to assess financial health through ratio and trend ... – PowerPoint PPT presentation

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Title: Financial Planning with FAST Tools


1
Financial Planning with FAST Tools
  • By Paul N. Ellinger
  • Gary Schnitkey
  • Travis Farley

2
FAST Tools
  • farmdoc companion project initiated in 1999
  • Development of 42 spreadsheet-based tools to aid
    decisions for producers, lenders, consultants and
    investors
  • Facilitate use, access, distribution of tools and
    resources through CD and internet distribution
  • Quarterly subscription
  • farmdoc download
  • via workshops
  • Approximately, 30,000 CDs produced and another
    35,000 downloads
  • Increased demand for education and training

3
Current Resources and Activities
  • 45 laptop computer lab
  • FAST educator / coordinator
  • CD duplication
  • internal and cooperate w/other extension programs
  • 50 annual meetings in Illinois / integrated FAST
  • 80 were supported w/RMA
  • Teaching modules for each program
  • Case studies and examples

Theme Focus Teach Decision Making Integrate
and utilize FAST Not just computer training
4
Educational Efforts3 Dimensions
Host(s)
Intended Audience
Content/Meeting Type
5
Content Modules
  • Financial planning
  • Crop insurance
  • Grain inventory pricing and management
  • Machinery management
  • Land investment and lease analysis
  • Enterprise analysis

6
AudiencesTargeted and General
  • Farmers
  • General and women via Annies project
  • Lenders
  • FSA
  • Farm bureau managers
  • College and High School Students
  • Educators (train the trainer programs)
  • College and Jr College instructors
  • Vo-Ag Teachers
  • Extension Educators
  • State record fieldstaff (Iowa, KY, Illinois and
    Alabama)

7
HostsGetting the right people at the table
  • Typical Extension Channels
  • Farm Bureau
  • Farm Credit System
  • Commercial Banks
  • Growmark
  • State Record Keeping Associations

8
FAST Tools - Overview
9
Financial Analysis
Assist in preparing and interpreting financial
information and measuring financial health
  • Appraisal of current financial position
  • Balance sheet
  • Ratio calculator
  • Cash flow planning
  • Cash to accrual income approximation
  • Estimates of deferred taxes
  • Repayment capacity analysis
  • Personal financial planning
  • Longer-term planning in development
  • Net worth allocation

10
Investment Analysis
Assist in measuring the economic returns and
performance of alternative types of investments.
  • Capital budgeting
  • Grain bin analysis
  • Land purchase analysis
  • Lease versus purchase
  • Machinery financing
  • MACRS calculator
  • Savings calculator
  • Time value of money calculator

11
Loan Analysis
Assist in calculating loan payments and
schedulescomparing alternative loans and
measuring the sensitivity of payments to changes
in loan parameters
  • Loan amortization
  • Loan comparison
  • Revolving loan calculator

12
Farm Management
Assist in developing enterprise budgets and
breakeven levels estimating costs of
machineryoperations and comparing crop
insurance andfarmland leasing alternatives
  • Break even analysis
  • Crop budgeting tool
  • Crop insurance calculator
  • Enterprise allocation and analysis
  • Farmland lease analysis
  • Machinery lease analysis

13
Grain Marketing and Management
Assist in tracking grain inventory and
estimating the costs and returns of
grainstorage and delivery
  • Crop storage analysis
  • Grain delivery model
  • Grain pricing model
  • Grain inventory management

14
Risk Management
Assist in evaluating the impact of farmland
lease types as well as marketing and crop
insurance strategies on revenue and income
distributions.
  • Crop insurance historical evaluator
  • Farm rent evaluator
  • Marketing and crop insurance risk model

15
Yield and Land Database Utilities
Assist in analyzing county-level historical
cropyields and land prices and assist with
common computations related to soil productivity
measures and yield predictions
  • Illinois, Indiana, Iowa crop yield database
  • Illinois farmland sales database
  • Illinois soil productivity index utilities

16
Financial Planning Modules
17
Day Program
  • Repayment analysis
  • Ratio analysis
  • Financial Planning
  • Annual and multi-year

18
Repayment Capacity
  • Critical for determining and understanding the
    income needs from the farming operation
  • Good discussions regarding family living budgets
  • Resources
  • Illinois record keeping data
  • Consumer expenditure studies
  • www.bls.gov/cex/

19
Repayment Capacity, cont.
20
Stage 1 Repayment Analysis
21
Stage 2 Repayment Analysis
22
For Illinois Risk Analysis
  • Enter Budget and Crop Insurance Data
  • Based on 31 years of county level production and
    price data
  • Assess the likelihood of achieving income levels
    needed

23
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24
Ratio Calculator
  • Designed to assess financial health through ratio
    and trend analysis
  • Minimum set of data needed to complete the sweet
    16 ratios
  • Calculate scaled health and trend index for
    each ratio.
  • Store multiple years
  • Professional version for multiple customers

25
Educational Programs
  • Case study
  • Drawbacks and cautions of financial ratios
  • Evaluate the strong and weak areas (liquidity,
    profitability, leverage, repayment capacity)
  • Assess strategies to improve the various areas

26
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27
Why Budget?
  • Decision analysis benchmarks
  • Cost control
  • Marketing
  • Identify opportunities
  • Contingency planning
  • Meet financial goals discipline
  • Managing cash surplus/deficits profitably
  • Organization
  • Communication
  • Monitor performance
  • And my lender wanted one

28
Desired Components of a Financial Plan
  • Focus on projected profitability of a plan not
    just cash flow
  • What do we need to break even?
  • What cushion do we have to meet debt payments?
  • Sensitivity analysis (stress testing)
  • Prices
  • Production
  • Costs
  • Interest rates
  • Basis of comparison and validation
  • Benchmarks
  • Previous year comparison
  • Comparison to actual

29
Getting Organized
  • Synchronize cash, loan, and inventory balances
  • Total cash expenses for 2005
  • Current inventories
  • Units and price
  • Status of government payments
  • Due from 2005 crop
  • Balance and payment schedules for loans
  • Interest owed at end of year
  • Scheduled payments
  • Items prepaid for 2006 crop and payable for 2005
    crop at the end of the year

30
Getting Organized, continued
  • Enterprise cropping plan
  • acres
  • share of acres
  • lease type and share
  • expected production
  • government payments
  • costs per acre
  • Crop insurance protection
  • Level of yield or revenue protection
  • Livestock plan
  • Expected production
  • Expected sales and purchase price
  • Feed costs
  • Other livestock expenses

31
Getting Organized, continued
  • Planned capital purchases
  • Expected level and cost of financing
  • Nonfarm sources and uses of cash
  • Wages
  • Business income/expenses
  • Family withdrawals
  • Before visiting lender
  • Check if lender is using suggested commodity
    prices
  • View Consumer Credit Report See handout

32
Financial Analysis
  • Case Study
  • Enter complete set of cash flow information
  • Customize budget entries per site location

33
Financial Planning Attributes
  • Built-in risk parameters
  • Quarterly projections
  • Cash flow
  • Income statements
  • Commodity sensitivity and break even
  • Previous year comparison
  • Scenario analysis

34
Financial PlanningDemos
35
Comments and Questions
  • Complimentary CDs
  • Looking for reviewers, partners and ideas
  • Cooperate in CD production
  • Facilitate your programs
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