When it comes to budgeting for farm businesses, financial advisors say greater adaptability in managing variable income, carefully consideration of what constitutes a true farm expense and financial clarity can all go a long way.
Start with clear parameters
For Darrell Wade, founder of Farm Life Financial, an advisory and farm-planning firm based in Peterborough, Ont., transition planning provides a good opportunity for both incoming and outgoing generations to understand the parameters in which they must operate.
Budgeting for both parties, that is, starts with sharing a clear cash flow statement. That statement can then be compared to lifestyle expectations, projected changes in expenses and other variable factors to determine what is required to stay profitable.
“The only way it will work is if there is clarity on the financial side,” Wade says. “It’s not about what we make from an asset, it’s what we keep.”
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