Best Practices for Collecting Financial Information from our Members
By: Mike Baker
How do we provide value to our customers and value in our relationships with our customers if we lack accurate financial information? “Helping Farm Families Succeed” in our line of work must be accompanied by accurate financial information. Without accurate information, more harm than good can be done. Asking questions, lots of questions, probing questions, open-ended questions, while being tactful, respectful, and direct results in a better understanding of a person’s operation.
How do we balance being direct without being rude or inconsiderate? It is important to recall we look at and review balance sheets and income information every day. We can become immune to the private and personal nature of the information and forget how intimate this information might feel to the person sitting across the desk from us. We must approach our customers with genuine care. This does not mean you tell a person what they want to hear or avoid a difficult conversation; it means being honest.
Bear in mind the impact incorrect information can have on our customers and Farm Credit Illinois. Remember we are in partnership with our members and are striving to bring them value. No list of questions can be generated to cover every situation because every customer and operation is unique.Learn to ask questions, the right questions to get the best, most accurate information possible and provide the most benefit to our members. The following list is a good place to start:
1)Do you have checks written that have not cleared your operating line? Go through transaction history with them to double check.
2)Have you accounted for all your credit card debt? For example, non-farm credit cards, cards your spouse or business partner have without your name on the account.
- How much do you and your spouse or business partners owe or have in the way of CC debt? - “these show up on a CBR and I need to know so we have an accurate accounting of outside debts”
3)Do you understand what accrued interest means? If they don’t, then explain it.
4)Have you financed any inputs through input financing? What are they and how much?
5)What input purchases are included in your investments in growing crops?
6)Crop inventory
- Priced or unpriced? Delivery date(s)?
- Where is grain stored “on farm or at elevator”?
- If at the elevator have you paid for drying and storage?
7)Do you have any debts with FS on their Ag-Finance program, or with Van Horn using Farm Plan, or PHI on their 0 percent incentive program?
- Is this debt for last year’s inputs or investment in this year’s crops?
8)Detailed list of crop inputs purchased and paid for? If dealer financed – what are the terms?
9)Do you owe any of last year’s inputs to any supplier?
10)What have you spent orinvested on next year’s crop inputs”?
11)If you liquidated your farming operation today – how much would be owed to you by someone who is taking over your farms for seed, fertilizer, tillage, cash rent?
12)Please provide me with any loan account statements or original documents so I have accurate knowledge of repayment terms, accrued interest, and I am able to understand the terms of all of your obligations.
13)Reminder – FCI Credit Procedure 102 requests documentation of any asset or liability that is approximately 10% of the total assets or liabilities
14)Bank accounts – bank name, branch location, account numbers
15)Savings – account number, rate, If CD – rate, maturity
16)Accounts receivable: from whom – age of account – if more than 1 year old it is likely a note receivable – collectability?
17)Marketable securities – obtain investment account statements – need specific stocks and number of shares, bonds or name of mutual funds
18)List cash rent paid for current year crop (investment in growing crop)
19)Complete machinery list – tax depreciation schedule is oftentimes best source that applicant has to provide Farm Credit with details
20)Livestock inventory – if a major part of balance sheet then detailed inventory sheets with dates acquired or born, costs and locations. Is any of the livestock priced under contracts? If so, what are the terms?
21)List of personal vehicles – don’t forget to ask about debt on vehicles, monthly payment amount and maturity
22)List of cash value life insurance from agent – make sure applicant is not quoting face value
23)Detailed retirement account statements
24)Farm land owned - plat book page. If partial ownership, who else has title? What is their relationship to applicant? Is title tenants in common or joint tenancy? When was land acquired? Cost or inherited?
25)Residence – location. If also own a second home, what is the address of that property? Cost of residences and when acquired?
26)Details of nonfarm assets or real estate – description, cost, when acquired, percent ownership if not 100%
27)Do you have any unpaid medical or dental bills? Amount, and details of repayment plan.
28)Leases – customer may forget to mention
29)Terms debt questions?
- Interest rate
- Amortization type
- Principal due in coming year
- Maturity – is it a balloon?
- Secured by what?
We hope the above questions give you a good place to start. Please feel free to ask an RVP, RM, CSD personnel, or an experienced peer about your unique situation or how to handle asking a customer for certain information. Together we will work to improve our relationships with our customers and demonstrate the value FCI brings to help them succeed.