The Texas Center for Local Food (TCLF) is built on responding to the needs of farmers and ranchers. Our primary goal is to help farmers earn a decent living from farming. To us, that means improving profitability of Texas farmers through business and market development. We want to help farmers understand and improve their financial performance, successfully market their most profitable product, access funding and resources to catalyze their vision, and build local food systems by identifying and connecting farmers with real local food buyers.

Financial record keeping and understanding how to analyze financial statements are daunting tasks for many small businesses, and while it's not something folks are eager to jump into, it underpins everything else we do in local food systems. Farms are businesses. If they don't have the cashflow and profitability (or existing capital) to operate year-to-year, they'll churn out of production and leave a gap in feeding our communities healthy, local food. We've watched this happen over and over, which is why we've been building our skills to provide more in-depth financial technical assistance to Texas local food producers.

With support from TCLF and my SARE Fellowship, I've been incredibly lucky to take two financial coaching courses from Julia Shanks at The Farmer's Office in the past year: The Farmer's Edge - A Coach's Primer and Beyond the P&L: Understanding Profits, Cash Flow, and the Financial Reality.

💡 Key concepts:

• Making more money from farming is a scaffolded process that moves from basic accounting, to developing systems, to tracking and measuring, to planning for growth.
• All transactions impact the balance sheet, but not all transactions impact cash.
• How you organize your numbers shapes your understanding of your business.
• The best accounting system is the system you will use consistently.
• Bookkeeping for taxes is different than bookkeeping for managerial decision making.
• One of the hardest things about calculating cost of production is understanding how to convert production yields into sellable units. Know your costs to produce and to process/harvest.
• Breakeven analysis is magical (if you know your cost of production and fixed vs. variable costs).
• If you want to increase profitability, you can 1) decrease expenses, 2) increase prices, or 3) increase sales. The latter is the go-to and the most complicated.
• If you don't track and evaluate your selling costs, you won't know if it makes sense to discount or sell wholesale at a lower price.
• Net income does not equal cash flow does not equal cash position.
• You can analyze the profitability of products or markets as enterprises by allocating direct and indirect expenses to each enterprise. There are many allocation methods!
• There is no one way to organize your chart of accounts or right tool to use or even best financial goal... as the farmer, you get to decide how to grow your business in line with your vision.
• Cash flow budgeting is a great way to plan ahead and be able to make adjustments throughout the year, and...
• Combining the P&L with the balance sheet helps you see the nuances of cash flow. Most cashflow budgets don't factor in credit cards, accounts payable, accounts receivable, and inventory, which is where things get tricky.
• You can use balance sheets to create cash flow statements and cash projections for your business.
• Good bookkeeping is the foundation of it all.

Conclusion:

If you're trying to improve your farm financial management - or if you're a service provider like me helping farmers with their finances - I strongly encourage you to buy Julia's book, The Farmer's Office 2nd Edition, and take her online classes! Her newsletters are also filled with little nuggets of wisdom.

And if you're a local food producer in Texas looking for personalized business support, I hope you'll reach out to our Farm Business Services team. Let's grow together.