After 40 years with FCS, Richard Hawkins offers advice for sound financial management
Working in ag lending for forty years is not only remarkable, but eye-opening as well. Richard Hawkins, vice president credit services with FCS Financial, recently celebrated his 40th anniversary with the Farm Credit cooperative.
Today, Hawkins works in the Springfield, Mo., office where he analyzes credit requests for FCS Financial member-owners all over the state.
Hawkins has seen a lot over the last 40 years, the first thing he points out is precision farming.
“There’s a production aspect to precision farming. But there’s a financial aspect to it as well,” Hawkins said. “Farmers are able use those tools to save on operating expenses and maximize profits.”
He noted many things are the same. “Farmers still grow corn and soybeans. They still raise cattle, swine and poultry. They are just doing it in a bigger way,” he said.
After spending four decades analyzing the financials of Missouri farmers, Hawkins has some insight into what works and what doesn’t.
“The farmers who are most successful understand a simple concept – you need to walk before you can run,” he said.
Hawkins explained the importance of keeping sound liquidity levels as an operation grows. Liquidity, or having enough cash on hand or coming in to meet upcoming demands, is a key area for a farmer to watch.
“It’s usually easy for a farmer to tell when liquidity deteriorates. When there isn’t enough cash, everyone usually feels it,” he said “But it’s also easy for liquidity to tighten quickly in farming.
An unexpected expenses pops up or expected income doesn’t show up.” By maintaining adequate liquidity, a farmer allows himself breathing room to make better management decisions long-term.
“Don’t overleverage,” he also offered. Leveraging, or using borrowed money, typically secured with owned assets, can be a necessity when growing the farm. Overleveraging, or borrowing too much, can create stress on the operation and the operator that can be challenging to get out from under.
“Listen to your lender when they express concerns,” Hawkins advises. “We look at these things all day, every day. In my case, every day for 40 years. When your lender expresses concern about your debt levels, pay attention.”
Unfortunately during his career, he’s witnessed farms go out of business for various reasons.
“There are some commonalities in the ones that don’t make it,” he explained. “Lack of sound financial management is often a culprit. The ability to understand the basic financials of the farm including cash-flows and break-evens, the impact of debt levels and the impact of capital spending often times isn’t there.” The ones that do make it are the exact opposite – they force themselves to understand those things.
Hawkins has had the privilege to see a lot of farm operations change and grow over his time.
“My advice to the family who wants to bring a child back to the farm is to make sure the farm is able to support another income. If it’s not, make sure you grow the scope of the farm in a way that makes sense for both generations.”
He advises farm families to bring their ag lender into the conversation as soon as they start to discuss adding another person to the operation.
As far as first generation farmers, his advice is simple.
“Find a mentor. Then gather a team of experts, including a good ag lender, to be in your corner.”
Katie Lambert is the director of marketplace education and engagement for FCS Financial.