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5 Agribusiness Financial Planning Tips

family picking blueberries

From supply chain disruptions to labour shortages, COVID-19 has introduced some major challenges to the agricultural industry.

However, it’s also highlighted its resilience and brought renewed awareness to the global importance of agriculture. While 2020 was the year of a pandemic we never saw coming, there are some ways to make things less uncertain going forward. Get ahead with our five agribusiness financial planning tips:

1. Set yourself up for success with a risk assessment

A key part of financial planning in any industry is identifying and mitigating risk. By doing a risk assessment now, you may prevent costly problems in the future. The main types of agricultural risks include:

  • Production risks: These cause your yield or output levels to be lower than projected, due to factors such as adverse weather, failure of farm equipment or pests.
  • Financial risks: Whether you have an unexpected input cost or lack an adequate cash reserve, financial risks eat away at your capital and endanger your equity.
  • Market risks: If a wholesale buyer goes bankrupt or a new competitor takes your share, market risks can destroy the business you’ve worked hard to build.
  • Human resource risks: It might be a family member who suddenly gets sick or a shortage of workers that can potentially devastate your livelihood.
  • Institutional risks: If a new government regulation or policy comes into play and you’re not compliant, your agribusiness could be at risk. 

A comprehensive risk assessment could also include COVID-19 protocols and procedures. This COVID-19 checklist is a good place to start. By identifying your risks, the impact they could have on your agribusiness and their likelihood of happening, you can be proactive rather than reactive. 

2. Stay updated on the Temporary Foreign Worker Program

Temporary foreign workers account for 20% of total employment in Canadian agriculture. In March of 2020, the Government of Canada exempted seasonal agricultural workers from COVID-19 air travel restrictions. At the end of July, the Canadian Government announced a plan to assist farms in paying temporary workers, which included investing $35 million to improve health and safety on farms and in employee living quarters to prevent the spread of COVID-19. 

These are just two of the many changes to the program in 2020. What adjustments will we see in the future? Most importantly, how will they affect your hiring budget, risk prevention programs and staff accommodation/transportation requirements? Check the Government of Canada website to keep on top of the latest changes to the Temporary Foreign Worker Program in 2021. 

3. Explore AgriInvest

AgriInvest is a government program that is accessible when you experience small declines in income. As an agricultural producer, you're able to make an annual contribution for up to 100 per cent of your allowable net sales to your AgriInvest account. When you do so, you’ll receive one per cent of the deposit amount from the Government of Canada. Then, when you are short on cash, simply withdraw these funds at any time without penalty. Learn more about AgriInvest

4. Protect your business with insurance

Imagine the financial consequences of losing a key employee to illness or death. Key person insurance is life or disability insurance that protects the company if an owner or essential employee gets injured or passes away. The company owns the key person insurance policy, and any proceeds are paid out to the business. This ensures that your business remains operational and financially sound until you find a replacement.  

Remember those production risks we mentioned earlier? Production insurance can help you manage crop losses due to conditions such as excessive rain, hail, frost, flooding and draught. See if you have an insurable crop.

5. Line up your financing

Part of mitigating risk could include getting a loan or line of credit (LOC) for a mortgage, equipment or inputs. A loan can provide a financial cushion when you need it, or keep you going if you’re in an industry (like apple farming) that ties up your revenue in accounts receivable for months after harvest.​

Get expert advice on agribusiness solutions

You’ve put a lot of hard work into your agribusiness, and we’ll work hard for you every day. Our expertise in agribusiness and local decision-making give us the flexibility to develop funding solutions for you. Connect with an advisor who understands your unique needs.