10 resolutions to support your farm’s success in 2025
10 resolutions to support your farm’s success in 2025
Canadian farmers are facing a wide range of challenges and opportunities in 2025, from rising input costs to fluctuations in the marketplace. These 10 practical steps can help you optimize your tax strategy and increase your cashflow to help improve the profitability and resiliency of your farm in the year ahead.
Canadian farmers are facing a wide range of challenges and opportunities in 2025, from rising input costs to fluctuations in the marketplace. Strategic planning is necessary to achieve success — and setting clear resolutions for the year ahead can help ensure you reach your goals. These 10 practical steps can help you optimize your tax strategy and increase your cashflow to help improve the profitability and resiliency of your farm.
1. Prepare accrual basis financial statements
While many farmers use cash reporting, switching to accrual reporting can provide a clearer reflection of your farm’s financial position. Accrual financial statements include a balance sheet that shows what the farm owes and owns and provides an income statement to reflect what your farm produced that year — regardless of when it was sold.
While accrual reporting often involves higher accounting costs, more work, and more time, it may be necessary if you intend to increase your borrowing in 2025. Working with an advisor to switch to accrual basis financial statements can give you a clearer picture of your farm’s financial situation and help you gain confidence from lenders.
2. Calculate and understand your financial ratios
Gaining a better understanding of your financial statements and ratios enables you to better manage your farm and meet your growth objectives. Your financial ratios can help you determine if your farm is generating enough income relative to its expenses and pinpoint how much of your capital is financed through debt.
Compare your operation’s financial ratio trends to the agriculture industry, your historical ratios, and your covenants. Land values have significantly increased over the past decade and debt-to-equity ratios have declined. This means that debt serviceability is typically the key challenge facing farmers. Considering options to improve your debt serviceability and profitability such as deferring discretionary expenses or investing in equipment to reduce labour costs can help you manage your farm and achieve your growth objectives.
3. Use APP cash advance
The Advance Payments Program (APP) provides up to $1 million in cash advance loans to help you manage your cashflow until you can sell your agriculture products. The federal government pays the interest on the first $250,000 of the loan and you have up to 18 months (or 24 months for cattle or bison) to repay the advance.
APP advances are available through 26 participating producer organizations across Canada. Enrolling in this program in 2025 can help you mitigate risks to your farm and better manage your cashflow.
4. Develop accurate financial forecasts for 2025
Financial forecasts enable you to make informed decisions and improve your relationship with the bank by ensuring you stay onside on bank covenants. It also gives the bank a better understanding of your plans for your operation so they can provide the necessary funding.
Banks typically provide a better risk rating to farmers who prepare a financial forecast each year. While historical financial ratios contribute to your risk rating, qualitative factors such as financial forecasts also affect your rating. Additionally, providing an accurate projection can often help your deal get approved.
5. Perform employee evaluations
Many farms do not have a formal employee evaluation procedure in place. However, employee evaluations are important to help your workforce learn and grow — and implementing HR policies and procedures can help support the success of your employees and your operation.
You can get started by developing an employee evaluation procedure that includes an easy-to-understand rating system and clear, specific, and measurable goals. Working with an advisor can help you assess the HR policies and procedures currently in place within your operation and implement new policies and procedures to support the needs of your workforce.
6. Participate in AgriStability
AgriStability is provided by the Sustainable Canadian Agricultural Partnership (Sustainable CAP). It is a margin-based program that provides an 80 percent compensation rate if your production margin in the current year falls below your historical reference margin by more than 30 percent.
Many farmers believe that crop insurance is enough to protect their operation. However, insurance cannot compensate your operation for losses caused by input cost increases or declines in commodity pricing. Additionally, the reference margins based on the past three to five years should be quite high, while the prospects for 2025 are uncertain. Consider whether participating in AgriStability this year could increase your peace of mind.
7. Invest in agronomy
Farmers rely on guidance from bankers, lawyers, accountants, insurance agents, and insurance advisors to run their farm successfully. However, adding an agronomist to your team can grow the potential of your operation by helping you manage soil, optimize crop yields, and explore how different farming practices impact your environment. This helps you make informed decisions to improve your operation’s productivity, enhance its sustainability, and reduce risks.
8. Develop a cyber security plan
Your farm uses technology to manage its financial records, crop data, livestock inventory, and more. A cyber attack can cause significant disruptions to your operations and developing a cyber security plan can help protect your farm from threats.
You can get started by ensuring that you use multi-factor authentication and installing anti-virus software to prevent cyber threats. Performing regular data backups and providing employee training to help staff recognize red flags can also help protect your farm. Additionally, an external advisor can help you develop a cyber attack response and prevention strategy.
9. Create an asset purchase plan
An asset purchase plan can help you determine how your next purchase fits into your long-term plan and whether it is consistent with your operation’s current position. It also helps you understand how you will finance the asset and optimize your tax deductions.
Financing does not require cash and may be a better option depending on the cost of debt. Operating leases allow you to make payments over a longer period of time and help conserve cash. Capital leases frontload payments to accelerate tax deductions, which allows your farm to claim expenses sooner than it would under the Canada Revenue Agency (CRA)’s declining balance depreciation method. However, chasing tax deductions by paying higher interest costs is not always beneficial — and it is important to carefully consider which option works best for your specific situation.
10. Calculate taxable income before year end
It is important to calculate your taxable income before year end to avoid tax surprises. This involves monitoring your farm’s income and expenses regularly and taking a proactive approach toward managing your taxable income throughout the year.
For example, you may be able to defer a portion of your income to the following year by delaying commodity sales. Using prebuys to purchase inputs before year-end can move expenses into the current tax year and lower your taxable income. Calculating your taxable income before year end helps your farm reduce income fluctuations, minimize tax liabilities, and support better cashflow.
Serving the agriculture industry
Take the next steps toward a successful farm
For more information, contact a member of MNP’s Agriculture team. We have a range of experience regarding all aspects of agricultural business — from primary producers through to food and beverage processors.
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