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Veteran Advisor

Places To Shave Expenses

From the same $0 profit article

 

PLACES TO SHAVE EXPENSES

There are probably 20 different types of farming expenses, but let’s hit some of the remaining ones briefly:  My comments are in parenthesis)

  • Utility costs. Switch to low-wattage LED light bulbs on motion sensors, and use programmable thermostats for heating and cooling. (It costs money to pay for the newer, more expensive equipment, and sometimes it takes years to pay back)
  • Insurance. Bid out your whole insurance package and think about lowering coverages to the bare minimum. Insurance companies automatically escalate property values over time, sometimes to unnecessary levels.
  • Rent. Try to make the case that average cash rents have come down in your region or that your current lack of profitability simply does not allow for the current cash rents.  (Be prepared for the landlord to demand all rents in cash up front)
  • Veterinary costs. I can assure you that some vets charge twice as much as others. Therefore, if you have a choice, ask some pricing questions and consider giving a new vet a try.
  • Accounting and tax preparation. You can learn to use Quickbooks or another program yourself to save on paying accountants. In addition, some CPAs charge much more than other ones, so feel free to bid out tax services.  (My CPA more than pays for his fees every year not only in his expertise but in his wider knowledge of options both in the near and far term.  If you can do better than your CPA, no doubt you need a different CPA.  Going alone may work for some but it's not automatic.)
  • Repairs and maintenance. Consider used parts and online sources, and certainly do winter maintenance to the greatest extent possible to try to avoid planting and harvesting
  • breakdowns.
  • Real estate taxes. Make sure the county assessor has the correct number of acres on record, especially the productive vs. unproductive acres. 
  • Labor costs. Unfortunately, in this record-low unemployment landscape, there’s not much to do, except literally do everything yourself.
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20 Replies
Honored Advisor

Re: Places To Shave Expenses

I already replaced fuses in the fuse box with gum wrappers.   Smiley Happy

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Honored Advisor

Re: Places To Shave Expenses

Great question Jim,,,,, that is what I am doing......cash flows and expense ratcheting.  

Started with lease evaluations......  any leases left that had $5+ corn in mind??  Travel time and to that 40 mile field way over there... what does that distance cost?

Moved to labor evaluation.     ---- efficiency, efficiency, efficiency.

Repairs ---- irrigation equipment ---ever notice how much the problems increase with strip til on irrigated circles?  Or how much a bean or wheat rotation helps the problem?

then fertilizer and seed.  Both can change with a cropping choice adjustment or an adjustment in expectations...... shooting for the moon has always taken a pot full of money(and created a crisis when we miss.)

Then sprayer management......... Better personal on that can save several dollars.----- Chemical planning beats emergency late catch up applications every time.

Basis and freight evaluation when it comes to marketing...... ie.  are you actually getting a bonus for that 40 mile delivery or just providing cheap freight?

Purchasing decisions....who makes them...Does the hired man know any other places to shop than John Deere and NAPA??

Lets look at Tire wear and travel time which leads and paid dead time,,,,,,,, woops we're back to that labor evaluation.  The management and labor battle is comical.  Good labor makes ya cry because they will move on to running a farm one day--- and the rest can drive ya nuts...... Ever get caught in the "tug o war" over time caused by a monthly salary and good benefits?  Or the great guy who has cattle on the side, can run anything as good as you, wants 60K & ins. from you and will be gone three months in the winter and weekends year round?  Then complain about the hours if he can't get home by 6 pm?

 

Ever notice how hard it is to get cirusXM off the cc after the operator signs the tractor up for two different billings?  Smiley Happy

 

This part is so much fun!

 

 

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Honored Advisor

Re: Places To Shave Expenses

Insurance ---- in process.  We will change companies for the first time in 40 years.  We got a bid from a Commercial Insurance Company instead of the old farmer member insurance co.'s and were shocked at the difference...... but as you say you have to be wise about what you insure and how much...... maybe share some of the liability.

 

Rent  -- Cash leases are inherently problematic..... they create inflexibility...  They have to be sent packing occasionally if they won't adjust when you just adjusted for them at high prices a few years ago...... We asked for a reduction on two that were well above normal cash rent in the area.  We are adjusting the important one and got kicked off in two hours on the other....Probably a lease that we never should have taken on and only profited when yields peak...the weather risk was all ours.

 

Real estate taxes...... Do you provide housing for employees.... our real estate taxes are getting high.  A small house we have in town is approaching $4k per year...... That's around $400 per month taxes and ins. when a two room appartment can be rented for $675.-700

... can you afford ownership?

 

 

Timely subject Jim.

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Veteran Advisor

Re: Places To Shave Expenses

SW - Seems  you  covered  the  could's,  might's,  and  and  may's  or  maze  -   -   -

 

What  is  you  subscription - consulting  co$t  for  your  management  arrangement  Smiley Very Happy  ? 

 

Forward  sales   con-sulting  please  -  for  LEA$T   LO$T   REVENUE   or  LOW  LO$$  bragginginging   rights  Smiley LOL   

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Honored Advisor

Re: Places To Shave Expenses

We have a couple of local farms in transition. One growing and one in decline. All based on the age of leadership talent. So I can sound bi- polar at times.
Tie that in with economic realities of equipment costs and labor availability and costs and I see farm operators making choices that would have seemed odd 30 years back.
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Honored Advisor

Re: Places To Shave Expenses

Most of those I work with I have some investment in or are owners I have managed property for /for many years. Descendants of farmers in the area so it varies. For a couple there is a “time spent fee”, others i manage the leases and invest in the entity that operates it so there is lease income involved. We take a small fee per bushel on marketing contracts or grain marketed through our grain facility on a few.
Just recently I have advised on “unrelated” or unassociated farming who’ve contacted me but I’m not at an age where starting a new enterprise is appealing.

Farm management businesses are not usually accounting consultants. and I find the process of recruiting clients and employees both awkward and difficult. Most businesses struggle with those.
I’ll address an ag class of students occasionally or some one referred to me by our cpa firm but that’s about it. Cheap advice is hard to hang responsibility on. Smiley Happy

Marketing is easier if you live in or very close to, a strong basis location.
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Honored Advisor

Re: Places To Shave Expenses

Selling marketing ideas to folks in terrible basis locations (like corn in the dakotas the least few years) seems lite selling snow cones in Alaska.
And in good basis areas you don’t need an advisor to find a bonus to an end user.

IMO— the biggest challenge in farming is knowing how to manage the cash flow statement.
Veteran Contributor

just two things

it's always good to communicate with your landlords... talk to them at times other than just when your making or negotiating a payment to them... but in doing so i keep these gems that a couple landlords have mentioned over the years.

 

A) "it's not my job to make your operation cashflow... that's your job"  there are others in the area that will pay what I'm asking  ----- 

 

B) your not my son or relative so don't expect to get a cash discount ... you have to earn it..

 

I've had some pretty good relationships with my landlords over the years ... taxes and their living expenses are changing just like mine are so it helps to think from there side of the fence when I talk with them  ... remembering that they are business partners in the farm with me and not my adversaries..many times it proves just how greedy, narrow minded and stupid we as farmers can sometimes be.

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Honored Advisor

Re: just two things

That is when you give him the harsh reality..... he is not someone who cares about you and he is right It is our job to make sure we cash flow.  Why should you work without pay to support him.

 

The whole question comes down to who cares?   and who doesn't?

 

Change is part of the process.  It is always hard to see what needs to change when profits are involved.  When they are not involved, things get much clearer............ especially when it comes to leases.

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