Farm financing by Louis de Jager, Kameelboom Akademie, Comprehensive practical farmer training
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inancing of a farming enterprise is such a critical aspect of overall farm management that it cannot be less than a subdivision of financial management. The distress call from farmers is usually money to keep their enterprises going. The need usually varies from large amounts of money to finance the purchase of a farm to smaller amounts just to satisfy the need for operational capital. Regardless of what the need might be, the farmer will have to see to it that money he spends will be managed correctly. It is already common knowledge that records are the basis of financial management.
Time and management decisions The impact of time lies at the heart of financial management. Growth objectives and investment alternatives imply long-term planning horizons for proper economic analysis of all flows of costs, returns and cash resulting from the investment. The results of current decisions may be influenced by costs, returns and cash flows incurred by past decisions. The manager’s inability or reluctance to plan over periods of sufficient length can lead to inadequate economic decisions. Most of the expectations managers use in making economic choices in the real world are uncertain. Uncertain expectations reduce the reliability of future plans and serve to shorten planning horizons. The need for management arises principally from these uncertain expectations. For some decisions, particularly those
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of a routine, repetitive nature, the manager can accurately estimate the possible outcomes and their degree of likelihood. Tools of financial management The manager needs to develop skills in applying financial management tools. Take note that a computer is not a management tool, but only a facility (device) for the development of managing tools. Information flows Flows of information concerning the past, present and expected performance of a farm business and its operating environment are essential for the financial manager. Internal flows of information are provided by an effective accounting (record) system. The accounting system will generate a continuous flow of information concerning the firm’s liquidity, solvency, efficiency, and profitability. It will aid the manager in controlling his financial affairs, reducing risks, meeting legal requirements, and analysing the farm business, as well as providing a basis for forward planning. This evidence of financial position also helps to demonstrate credit
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