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HomeMy WebLinkAboutThe Citizen, 1995-07-19, Page 18SUMMER ADVENTURE crafts, games, skits AT BRUSSELS MENNONITE FELLOWSHIP JULY 18. - AUGUST 18 Tuesday: Ages 11 & 12 1 - 3 p.m. Wednesday: Ages 3 -5 10 - 12 noon Thursday: Ages 6 - 8 1 - 3 p.m. Friday: Ages 9 & 10 1 - 3 p.m. PREREGISTRATION NECESSARY Call 887-6388 Ask for Christy or Teresa Registration fee: $1.00 per child for each session Learning the gas line More than 100 people gathered at the BMG Arena on July 7 to hear the presentation by Union Gas regarding the installation of the- Iihe, advantages of gas as well as receive answers to questions. Terry McNally, co-ordinator of construction for Union Gas, lead the talk. Firewood Hard Maple or Ash SLABWOOD Limited Time Offer - Call now - $130./17 cu. yd. Truck Load Delivered within 20 miles Mileage charge Beyond That Large Quantity Discounts When You Haul!!! Craig Hardwoods Ltd. 519-526-7220 Auburn. Ont. DETAILING Large Summer Sales Accessories Truck Specials & MORE Custom & Auto Care & Audio & Installation Cars & Pickups Large Trucks • Wasfr & Shammy • Crystal Shine & Wax • Engine Shampoo • Door jam shampoo • Tire treatment • Complete Interior deep-clean shampoo & wipe-down (Armorall) Regular cost = $134.99 plus GST SP e C131 Vtate• ;•99.99 plus GST • Wash & Shammy • Crystal Shine & Wax • Total aluminum & stainless steel polish front to back • Tire treatment • Engine shampoo ,Complete Interior deep-clean shampoo & wipe-down (Armorall) . Regular cost .7. $724.60 plus GST Spp C123 ... Rate $599.99 plus GST Wroxeter, ON. 519-335-6669 Devon Henry PAGE 18. THE CITIZEN, WEDNESDAY, JULY 19, 1995. Cashflow important component to farm business By Brian Hall Business Management Advisor for Huron County Cashflow is everything to the farm business. It pays the bills, feeds the family, makes loan payments and allows us to make capital purchases. Cashflow is like the oil that keeps the farm engine running. Strong production efficiency through things like milk production per cow, pigs produced per sow, or crop yield per acre are key to keeping the engine running at all times of the year, and in all weather conditions. When cashflow from the farm is not enough, operating credit from a bank keeps the engine topped up between oil changes. It is important to manage the amount of operating credit used to keep the farm engine running smoothly, without seizing or becoming awash in credit. Here are a few ideas for managing operating credit to avoid any year end surprises as to where their money went. Operating loans are secured by inventory of crops, livestock, supplies, and accounts receivable. Capital purchases such as equipment, buildings, quota and breeding livestock generally should not be financed using the operating loan. Lenders often do not mind funding these purchases through the operating for a short period, because you cannot often foresee a buying opportunity that may come along. Too often these purchases remain on the operating from one y.ear to the next. Also, because interest rates have also fallen during the last couple of years, interest rates are lower on operating loans than term loans. This results in even more incentive to fund purchases through the operating loan. Funding capital purchases through the operating limits the amount of money you have to spend on other things. This can be compared to using the same amount of oil to keep two engines running. What happens is what lenders call "thin margin" - not enough inventory to cover the operating. This invites security problems for the lender and hides the true debt payment require- ments. This year there will be more than free food samples and cooking demonstrations at A Taste of Country Food Fair in Blyth, July 22, as the food fair takes a step towards its goal of encouraging more production and processing of food products. The Huron Business Centre is sponsoring a series of seminars throughout the day at A Taste of Country 1995. Paul Nichol, director of the Centre, has lined up some speakers. "It's amazing to me" Nichol says, "that Huron County is the foremost agricultural county east of Winnipeg but there is very little value-added processing of the foods we grow. We're all sensing that there are opportunities out there for the processing, and-I'm hoping that the seminars will stimulate thought." Agriculture is still the biggest strength of the county, he says, but with a declining number of people needed to produce the same, or even more, production, there just aren't as many jobs unless people begin to look at more ways to build spin-off jobs. Generally lenders like to see margins in the 50 to 70 per cent range. A 50 per cent margin means you have twice as much inventory, supplies and receivables as operating credit. Fifty per cent of this can be used to pay back the operating and 50 per cent for the farmer to spend. Use a loan for its intended purpose: operating for working funds and term loans for capital purchases. Monitor the cash flow during the year. The projected cash flow statement is often misunderstood and mistrusted by many. After all, how can one know what the weather is going to be or prices six months from now. However, the cashflow statement is the single best piece of paper for monitoring the farm engine "oil" level during the year. It can help alert you to if and when you may need more credit or rescheduling payments. What happens when cash receipts run ahead of projections? This sounds like a nice problem to have. It leaves the impression that the farm is doing much better than expected. It is important to know whether this extra cash is from revenue coming into the farm ahead of schedule, or perhaps because of a lag in expenses. What happens if expenses seem to be running ahead of projections and you have a temporary cash flow problem? If the problem is short term, determine why this is happening. Clearly communicate this with your lender and arrange for a short term bulge in the operating. It will also cost you more to arrange for a short term bulge in the operating. Lenders try to provide the operating credit asked for in the projected cash flow statement provided by the borrower. A conservative cash flow will allow you some room to manoeuvre in case receipts don't come in when planned or when there are unplanned for expenses. ***** Watch accounts payable and receivables. Accounts payable and receivables should be tracked on a monthly basis along with the cashflow and operating line of The seminars, he says, are balanced to give information both to those who are already involved in food processing and those who are just thinking of getting started. The first seminar is Finding the Right Niche — New Market Opportunities for Locally-Grown Food Products. Conducted by Bill Baxter, rural business consultant with the Rural Development Secretariat, the seminar will give participants some insights into changing market trends and how they affect the consumer demand for food products. In addition, tips will be given on how to research and "spot" growing market opportunities in time to take advantage of them. Seminar two is Giving People What they Want — Customer Service and Quality Assurance in the Food Sector. John Needham, case counsellor with the Federal Business Development Bank will discuss what the ''market" is looking for in terms of food quality and customer service. Particular emphasis will be placed on the restaurant trade and what is Continued on page 19 credit. Trade suppliers provide short term (30 day) credit to customers as a convenience. Most prefer not to finance the feed bill for the year or crop inputs until harvest. Supplier credit can also be expensive. One supplier I checked with charges one per cent month; which is the equal to 12.7 per cent per year. Some charge 2 per cent per month, or 26.8 per cent per year. Some producers have also made use of the Agricultural Commodity Loan Program to,finance crop inputs. This program has been a good source of credit for crop producers. ***** Some families are surprised at At your residence, be sure to keep grass, hedges and shrubs well- trimmed to reduce mosquito resting areas. At the vacation property, where natural landscaping may be preferred, try to minimize over- grown bushes and trees that are immediately adjacent to the cottage, deck and dock. year-end what their family living costs were for the year. Personal expenses can be "lost" when paid out of the farm account. You may find it rewarding to monitor your living expenses. You can do this by having a personal chequing account. Many lenders encourage this. On a monthly basis, funds can be transferred from the business account to the personal chequing. You will know how much you need for the family, on a monthly basis. Personal chequing accounts also have lower cheque and monthly fees, and makes it easier for an accountant to separate personal and business expenses. ***** Try to time payments to when cash flows comes in as much as possible. Rent payments are an example. Increase the frequency of buying and selling. Buy supplies only as needed. Cash cheques as soon as possible. Take advantage of interest free periods available with expenses such as suppliers, telephone, and hydro. There is a saying that good managers learn to like to do the things that must be done in order to make the operation a success. Planning the future is the starting point. Even the best of farm plans mean little if you forget to monitor and re-adjust your program as needed during its development. Good luck with achieving your plans for the farm. Food Fair offers business seminars