Financial foundations for regenerative transitions
When we step off the industrial farming input treadmill towards a more regenerative farming system a major risk we face lies in our financial management skills and how we use these as we navigate the transition process. Neglecting to carefully monitor and manage financial resources during any transition process is a common cause of financial stress whether the transition be of a regenerative nature or related to transitions like succession planning.
With our excitement about the regenerative possibilities we see before us it can be tempting to neglect financial management. We are in agriculture because of our love of agriculture, not necessarily because we love or are good at managing money. Yet skills in managing money are a key aspect of the viability of every business venture in every industry. When it comes to a regenerative agriculture journey it is tempting to become so focused on soil health, cover crops, grazing management, composting, etc that we might take our eye off the ball in the other key areas. Navigating a regenerative transition process successfully requires that we take a holistic approach and steward our re-sources well in three key areas: our financial resources, nature’s resources (soil health) and human resources (mindset).
Successful regenerative transitions require good financial management skills. Confidently understanding our financial position and the options available means we can make informed and timely decisions and take advantage of opportunities that arise and mitigate the risks. It can be common for farm business owners feel unconfident in their financial skills, even after completing financial training courses. This is because where the rubber hits the road with financial skills is in moving the tools. Learning to budget and analyse your financial position is a lot like driving a car, you don’t learn to drive a car by watching someone drive a car, you learn to drive a car by driving a car!
The only way to become confident in your financial management skills and work through any confusion you feel is to use financial management tools. The more you use these tools the more confident you will get. Start with the simple most basic tools and build up from there.
Some key aspects of farm financial literacy include understanding and monitoring:
1. Net worth (the value of your farm business at a given point in time)
2. Cash flow (the ability to meet your financial obligations as and when they fall due)
3. Profit (the economic surplus generated by your business over a period of time)
4. Enterprise analysis: knowing how different enterprises in your business are performing and your cost of production.
Alongside our own 18-year adventure in what is now known as regenerative agriculture I spent 12 years growing my financial skillset working as a Rural Financial Counsellor. I had a soil health “aha” moment previously that meant I could plainly see the connection between declining soil health and increasing farm financial stress and declining resilience.
When you see it, you just can't unsee it!
My passion for soil health led me to taking the opportunity of a contract with Integrity Soils in 2019. As I have been growing my own capacity in relation to restoring soil health with clients Australia wide these past few years, I now keep seeing the importance of the financial aspects that need to be addressed as part of successful soil restoration strategies.
Everything is connected, and here I am again, being called to spiral back full circle to being wholistic in my approach.
Part of my personal regeneration this past 15 months since launching Reinventing Agriculture has been reintegrating my farm financial skills into the services we offer, alongside continuing working on soil restoration strategies and supporting the mindset shifts that accompany regenerative transitions. Being regenerative on a personal level requires us to reconnect with the parts of ourselves that we have separated off into boxes and reintegrate these. We don't naturally fit into boxes very well! Reinventing Agriculture is a space where both Angus and I integrate all the aspects of our skillsets in relation to soil health, mindset, subtle energy and farm financial management into our coaching approach and learning experiences.
I have created the Farm Financial Foundations program to build the regenerative capacity of farmers who are transitioning to more regenerative farming systems. This program provides regenerative farmers with access to the essential skills and resources needed to navigate the financial aspects of the transition successfully. The intention is that by keeping things simple they can be immediately applied in your business and you will be more inclined to move the tools.
The Farm Financial Foundations program is a series of 8 individually tailored coaching sessions using your own financial information. Topics include:
· Tax vs management accounting
· Net worth
· Cash flow budgeting
· Profit
· Farm financial health indicators
· Enterprise analysis
· Money mindset.
Email Kim Deans for more information on 1 : 1 Farm Financial Foundations coaching or in person group learning workshops.