Welcome, visitor! [ Register | LoginRSS Feed

Gross Income vs Net Income on Poultry Farms

| Farm Cash Flow Blog | August 17, 2017

Through marketing poultry farms, we get the opportunity to review farm’s financial information. This will include income, expenses, and mortgage payments. Often times we advertise a Gross Income for a farm. Sometimes there is confusion on Gross Income versus Net Income. Past that many buyers may ask “What will my Net Income be for this farm?”. Most of the time as an agent we cannot answer that question. Net incomes will be a moving target that is based mainly on the lenders assignment or minimum payment. Then management styles from producer to producer will differ greatly. That will result in variables in expenses like Power, Water, and Gas for Heating.

Gross Income refers to the total amount that the producer is paid from the Integrator. This will be the amount stated on the IRS Form 1099 issued at the end of the tax year. Every penny paid to the producer will be reflected on the 1099. From the gross income, in most cases, the producer will pay Power, Water, Heating Gas, Maintenance, Insurance, Labor, and other expenses related to owning a farm. The bulk of the Gross Income will be paid to the lender in the form of an assignment payment. Depending on the type of farm, the lender involved, and the buyer’s financial status, assignments can range from 45-65% of the Gross Annual Income. If the farm produces $200,000 of Gross Annual Income and the lender has a 50% assignment, the producer will pay around $100,000+/- in principal and interest annually. The remaining $100,000.00 is the amount the producer will pay the production expenses from. There are no set percentages that will accurately calculate the expenses for a farm. Each farm and producer will operate at different levels of expense. For example if the total annual expenses for the farm were 30%, that would be $60,000 in expenses. The Net Income will be $40,000.00. These are just examples to give you an idea of how to figure the Net Income.

When it comes to taxes there are multiple factors that a producer can use to lower their taxable income level. We encourage everyone to seek the guidance of an experienced accountant.

Please feel free to contact me if you have any questions about the cash flow of a farm. We will provide you the information we have about a farm. We can also refer you to a qualified group of lenders that can discuss your situation and the farm you are considering.

Thanks,

Randall Upchurch

Farm Agent

Southeastern Land Group

256-239-5379

randall@selandgroup.com

419 total views, 40 today

Poultry Farm Insurance – How’s Your Coverage?

| Poultry Farm Insurance | October 17, 2014

by Mistie Wiggs

With all of the details to be considered when purchasing or building a new poultry farm, it can become quite overwhelming to be sure you have left no stone unturned and have a firm grasp on being sure every aspect of your new operation runs smoothly. There are many folks along the road that are there to help you in that journey from the Realtor looking tirelessly for that perfect property, to the lender crunching the numbers, to the integrator to the insurance companies who want to help you protect your investment in the event of the unknown.

In light of the bad weather event that tracked across North AL recently, many of us are thinking about our insurance. What are we to do when it seems our options for affordable poultry insurance are dwindling down with every passing storm? There are definitely still options out there, and good options. As an industry, it’s important to be on the same page and work together to keep those premiums affordable, and the options available. I don’t know how many of you listen to Dave Ramsey, but I like his common sense style. His philosophy on how to handle financial decisions is very practical and definitely not difficult by any means, but it is tough, in that it requires sacrifice. No pain no gain kind of stuff. You could apply some of those same principles to your property insurance. One of the tools you have within your policy that you can use to your advantage is your deductible. The higher your deductible, the lower your premium.

You know what your comfort zone is. What can your reasonably pay out of your pocket without putting yourself in a financial hardship? If that number is $10,000, there is no reason to have a deductible on that policy less than $10,000. You take the savings instead of giving that premium to the insurance company, stick it in your rainy day fund and have it ready in the event you need it. When we run a business it is always a good idea to have a reserve to handle unexpected expenses, and a deductible would most definitely fall under that. By having a cash reserve, you have given yourself a safety net to handle those emergency situations, and you have also kept one of your major expenses down by taking on more of the risk.Randy Jones & Asssociates LOGORev
Beyond that, it’s important to have an annual review of your policy to be sure that rates are still in line. Also, if you have made updates to your facilities, communicate that to your agent to be passed along to underwriting. Insurance companies love people that maintain their property and make an effort to keep those buildings in tip top condition. Insurance, I have found, is a very touchy subject. There are often deep emotions tied to those conversations because of past experiences, lets downs, surprises, etc. That is real, and it’s part of the business. The key is to be sure everyone is on the same page and that all coverages are communicated and understood. If there are endorsements to the policy, find out what they are and how they work.

One of the best things about Alabama is the poultry industry and all of the wonderful people that fall under that umbrella, whether they are a farm owner or affiliate. I think we all work together well and everyone has a way of looking out for each other. It’s just the Alabama way!

Mistie Wiggs, Producer
Randy Jones and Associates
P O Box 1576
Albertville, AL 35950
256-558-4269 cell

4055 total views, 2 today