Accounting for Profits continued from page 16 operating expenses, a fi nancial statement from the most current period is generally suffi cient to estimate future monthly averages. Expenses that are concentrated in certain months should be split out accordingly (e.g. Property taxes and farming/crop expenses) to accurately refl ect cash needs when payments are expected to be made. SUPER POWER Involve nutritionist To get a good handle on feed expense, we recommend involv- ing your nutritionist in the calculation of feed costs per head. Feed costs for milk cows should be suffi cient to achieve milk pro- duction levels used in the budget. You will want to also consider herd growth when calculating feed costs. It’s easy to run numbers on a static herd, but with high feed prices, any growth in the herd left unaccounted for can be a major draw on cash fl ow. One of the most important parts of projecting cash fl ows is fi guring produc- tion on milk cows. One or two pounds of milk per cow per day can make a signifi cant difference in the numbers, especially on larger operations. Your nutritionist should be a part of this discus- sion as well. In the end, your projections should refl ect as closely as possible the actual result achieved. Pay-down equal value When preparing the projections, it’s important to consider usage of forage inventories. Consumption of feed inventory should allow for pay-down of the feed note of an equal value. Borrowing needs for large inventory purchases should also be projected into the time periods they will actually occur. The ef- fect of crops raised and inventoried should also allow for reduc- tion of the feed note as they are fed. Include debt service requirements on non-operating debt, as well as interest expense on all debt. When considering debt repayment, you might also give attention to aged payables and include catch-up payments in the projections. When all income and expense have been considered, you will have a projection of monthly cash fl ow available to pay down operating debt or shortages, which may make additional bor- rowing necessary. Your loan-to-value can be calculated by fi gur- ing operating debt as a percentage of herd and feed collateral. Cash fl ow available for pay- down or needed for draws on that debt will affect changes in loan-to-value from month to month. Your banker will be pleased that you are taking steps to manage your LTV’s. Invaluable exercise As we’ve assisted many of our clients in setting up and monitor- ing cash fl ow projections, the overwhelming majority have found it to be an invaluable exercise. I will emphasize the importance of being realistic. You want your projections to be achievable. Update your projections monthly and measure budgeted vs. actual results. These days, many banks are considering fi nancial sophistication of management as part of their assessment of risk, which impacts your interest rate. Presenting achievable, complete, well thought out cash fl ow projections will go a long way in convincing your banker that management sophistication should have a positive effect on that assessment. Ë 250% More Powerful Than Corn. EnerGII ® creates immediate results and sustains them – in research trials and on thousands of dairies throughout North America – dependably delivering energy to all the right places. EnerGII is rumen inert and safely packs more than 2.5 times the energy of corn without upsetting rumen balance! The Brains to Improve the Brawn. Efficient dairies use efficient energy and EnerGII is the smartest energy solution on the market – dramatically improving herd condition, managing total costs, and predictably improving ROI. Delivering in Your Time of Need. EnerGII predictably improves milk production and body condition, throughout the crucial periods of summer heat. It’s so powerful, just 1⁄2 pound of EnerGII reliably delivers 2.5 lbs. of milk – so you know we’ll be there when you need us, like any good hero would. For more information or to find a distributor near you, visit us on the web at VirtusNutrition.com/EnerGII, call 1.800.225.4519, or email TheEnerGIIDifference@VirtusNutrition.com EnerGII ® and Virtus Nutrition™ are trademarks of Virtus Nutrition, LLC.