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Jeff Bowman at Grimbleby Coleman<br />
CPAs encourages growers and processors<br />
to come to the table with hard-hitting<br />
questions on the modeling of cash flows,<br />
tax impacts and losses, write-offs from<br />
new developments and financial resourcefulness<br />
ideas to get through this drought<br />
(photo courtesy Grimbleby Coleman CPAs.)<br />
Continued from Page 39<br />
cash flow projection tool to understand<br />
your “normal year” or average costs of<br />
production. With a budget or cash flow<br />
projection in hand, consider the following<br />
questions:<br />
How much revenue loss can you<br />
handle and still break even?<br />
What pricing of water is justifiable?<br />
What is the cost of water (if available)<br />
versus loss of yield? If water is available,<br />
can higher water costs be offset if the<br />
crop price increases due to shrinking<br />
supplies?<br />
Do you have capital available to<br />
withstand losses from drought years, or<br />
should land be sold/put to alternative<br />
use?<br />
What does the model of cash flow<br />
look like three to five years in the<br />
future under various water availability<br />
and pricing scenarios? Remember, permanent<br />
crops cannot be easily scaled<br />
down in small increments; more often<br />
than not, related decisions impact large<br />
blocks of land and long-term investments<br />
(or loss) as plants are removed or<br />
time passes before new plants become<br />
productive.<br />
Are your farm lenders in the loop? If<br />
the land is security for a debt or operating<br />
lines, will the lender impair value<br />
based on decreasing water allocations?<br />
Will that impact the borrowing base?<br />
How will losses impact taxes and<br />
cash flow? Can losses be carried back<br />
to reduce prior-year taxes paid, or<br />
should they be held to offset future<br />
income?<br />
Our team at Grimbleby Coleman<br />
CPAs encourages growers and processors<br />
to come to the table with hard-hitting<br />
questions on the modeling of cash<br />
flows, tax impacts and losses, write-offs<br />
from new developments and financial<br />
resourcefulness ideas to get through<br />
this drought. With that information,<br />
we can develop the right financial plan.<br />
Comments about this article? We want<br />
to hear from you. Feel free to email us at<br />
article@jcsmarketinginc.com<br />
40 West Coast Nut <strong>Dec</strong>ember 2021
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