FINPACK is a computerized farm financial planning and analysis system. It will help you evaluate your financial situation, explore alternatives, and make informed decisions about the future direction of your farm. It is not a record keeping system. Instead, FINPACK gives you the tools to effectively use your Quicken records in managing your farm.
FINPACK includes three programs to help you manage your farm finances:
FINAN is a year end financial analysis that answers the question "Where am I?" It provides an in-depth look at financial progress over the previous year and helps identify strengths and weaknesses. FINAN can provide a whole farm analysis and individual enterprise analyses.
FINLRB, or financial long range budgeting, helps chart the financial performance of a farm business under different future courses of action. It answers the "What If?" or "Where do I want to be?" types of questions in terms of liquidity, solvency, profitability, repayment capacity and financial efficiency. Future plans such as expansion, new enterprises, different enterprise combinations or debt restructuring are compared against the current operation or "Base Plan."
FINFLO projects monthly cash flows for future years based on projected or current production, marketing and financial plans. Once you have determined where you want to be, FINFLO helps to answer the question "How am I going to get there?" In addition to cash flow projections, FINFLO can be used to prepare projected income statements and balance sheets for up to 15 years.
These FINPACK programs allow you to analyze past performance, make financially informed future plans and prepare monthly or multiple year cash flow projections for your farm business in terms of solvency, liquidity, profitability, repayment capacity and financial efficiency. All FINPACK programs generate ratios and measures that are consistent with the recommendations of the Farm Financial Standards Council.
The first step in doing any type of analysis on your farm business is the completion of the balance sheet at the end of the business year. The balance sheet shows as of a given date (usually December 31 or January 1) what you own (your assets), what you owe (your liabilities) and your net worth, the difference between assets and liabilities. A complete set of Quicken farm records that includes all your asset and liability accounts will help in providing the financial information needed for your balance sheet.
Critical to the completion of the balance sheet is the need to take inventories at the end (or beginning) of the year. These inventories should include all supplies on hand that are used in the farm business, all market and breeding livestock on hand, all stored and purchased feeds, all grain held for sale and all machinery and equipment. The market value of these current and intermediate assets are added to the market value of your land and buildings (long term assets) to give the market total value of your assets. Other assets that might be included would be the value of non-farm assets including non-farm investments and real estate. These assets will add to your net worth, but will not be included in any analysis of the farm business.
On the liabilities side of the balance sheet will be all your loan balances, the principal due on those balances in the next 12 months plus any accrued interest, accrued real estate taxes and any accounts payable as of the date of the balance sheet. Again, you can include any non-farm or personal liabilities, as these will affect your net worth.
FINPACK includes a balance sheet so that the numbers can be transferred into any of the various programs. The FINLRB and FINFLO programs require a single balance sheet and the FINAN program requires a beginning and an ending balance sheet for the year being analyzed.
The output of the FINPACK programs is primarily financial in nature and includes the sixteen ratios and measures recommended by the Farm Financial Standards Council. These sixteen ratios and measures and their interpretation, in most cases, is based on the market value of the assets included on the balance sheet. The FINPACK output also shows how most of the measures are calculated. Each of the sixteen measures fall into one of the following five categories: liquidity, solvency, profitability, repayment capacity and financial efficiency.