The Importance of Updated Records

A business person reviewing papers with a customer
16 Mar 2021

Many times, the first question we get as loan officers is “what information do you need from me in order to qualify for financing.” We usually lead into that with three years of tax returns, balance sheet, and a loan application filled out. These are the key pieces of information that we look at when determining if a customer qualifies for financing. We understand that sometimes it can be troublesome for the customer to bring these items in or to create a balance sheet. But one of the things that helps the loan officer - customer relationship in the future is if we can maintain updated financials year after year, even if the customer doesn’t have an operating loan with AgCountry or isn’t doing business on a year-to-year basis. At the end of each year, we usually send out the prior year-end balance sheet and ask for the customer to make any updates or changes they see fit. Along with this we ask to have an updated tax return sent to us if we don’t prepare their returns. By doing this, we have a more accurate picture of what is going on within the operation and any major changes that happen along the way.

An example of this would be if a customer brought in a 12/31/2018 year-end balance sheet and was doing a new real estate deal at that time. Then let’s say the same customer would like to do another real estate deal on 3/1/21. If we don’t have consistent records on file, they then would have to update their balance sheet and provide the past three years of tax returns. If the customer would have brought in his 2019, 2020 year-end balance sheets along with his 2018, 2019, and 2020 tax returns each year at year end, then the process of getting the loan approval would be quicker for everyone.

As I mentioned earlier, not only does keeping records updated help save time, but it also helps keep an accurate representation of the financial situation of the operation. This helps your loan officer keep track of any purchases and sales that may have happened, or any other major changes to the financial statement that we may not know without having consistent records on hand.

One of the key factors that I believe benefits the customer the most by providing AgCountry with their yearly information is it truly allows us to analyze and reconcile the income statement to the balance sheet and earnings. This gives the customer the full picture of what their profit was the year before after debt servicing and owner withdraws.

It is very important to know where your operation stands when it comes to earnings because that is what allows you to make the right financial decisions that will be best for your farm operation now and into the future. Plus, it is a lot easier to update these each year rather than three years down the road when you are trying to update everything all at once. This isn’t something that is mandatory, but it is something that can be beneficial to both the customer and the loan officer.