Mike Whaley - Ag Lending Balance Sheets/Financial Statements

Mike Whaley discusses Ag Lending Balance Sheets/Financial Statements.

Mike Whaley - Ag Lending Balance Sheets/Financial Statements
Featured Speaker:
Michael Whaley

Michael Whaley is a graduate of Purdue University who has over 20 years of banking experience specializing in lending. The one thing Michael has been doing longer than lending is farming. Farming has been a part of his life every day since he was a child. With his experience, Michael is the perfect fit for Ag Lending here at Heritage. He is currently the president of the Administrative Council at his local church, a board member on the Jefferson Township Rurtian Board, and on the State Board for the Indiana Young Farmers. Michael appreciates what he does and loves talking with farmers about innovations and how he can help them grow.

Transcription:
Mike Whaley - Ag Lending Balance Sheets/Financial Statements

Prakash Chandran (Host): Whether you're managing a business or simply managing your own personal finances, understanding how to use a balance sheet is a crucial, but sometimes confusing part of the process. Here with us to share more is Mike Whaley, an agriculture loan officer at Heritage Federal Credit Union.


This is Talking Cents with Heritage. I'm your host, Prakash Chandran. So Mike, thank you so much for your time today. I really appreciate it. let's get started with the basics. What exactly is a balance sheet or financial statement and what is it used for?


Michael Whaley: A balance sheet or a financial statement is anything in a given time will tell you where financially, whether net worth or your working capital. Lending institutes use them to determine what payments you have and if you can meet debt-to-income ratios and, basically, whether you can make your payments. And then, you yourself can use these to determine where you're at, at any given time, whether you're going forward or backwards with your net worth and whatnot.


Host: I understand. So, I know that a balance sheet, at least for me, I've never really filled one out before. Usually, that's something I think I would think about for business purposes, but when actually should one be filled out?


Michael Whaley: I believe everybody should fill one out every year and preferably at the same time each year and, again, preferably at the beginning like January 1. By doing that, you know where you stand financially, whether you're going backwards with your financial terms or if you're going forward. It tells us and it tells yourself how much funds you have, whether your working capital is sufficient enough to cover your upcoming debts. And again, it just tells you at any given time where you're at.


Host: Now, do you recommend like software or like a template that people can use to actually fill out a balance sheet for themself?


Michael Whaley: I do. We have one if anybody would like to get a hold of me. We can e-mail it to a person. I don't know, I'm sure you can find something out there in Google, but we have one made up already.


Host: Okay. That's really helpful. I imagine that there are many different ways to fill out a balance sheet, but I'm curious as to some of the things that individuals tend to omit that actually really should be on that statement.


Michael Whaley: You should put everything that you own and everything that you owe on a balance sheet. Most of the time, people and/or businesses, what they end up forgetting is what they have accounts payable. Those are actually bills that need to be paid. And so, they need to be on there. Same thing, accounts receivable. If somebody owes you money, it needs to be on there. And those are the things that usually people forget. You put down every car that you own and be realistic with the values. Don't tell me you have a 2000 model car with 200,000 miles on it that's worth $60,000. It's not what you paid for, it's what you can sell it for today.


Host: Yeah, that makes a lot of sense. And just to get the terminology right, when you say accounts payable and accounts receivable, accounts payable is, for example, a loan that you might owe, and accounts receivable is when someone owes you money. Is that correct?


Michael Whaley: Somewhat. Accounts payable isn't necessary a loan. It could be a bill that you haven't paid yet, so it may not necessarily be a loan, but just a bill.


Host: Got it.


Michael Whaley: And then, accounts receivable would be the same way. If you billed somebody and they owe you money, there's a place in there for loans all by itself, but that's generally the idea..


Host: Yeah. You can see why you say it's so important for everyone to do it at least once a year. It kind of forces them to take inventory on their whole financial picture, like what are all the outstanding bills, what are all the loans, and put it all in one place just to see where you are or a snapshot of where you are financially.


So when we talk about who exactly should fill out a balance sheet or a financial statement, you're basically saying everyone should. No matter what age you are, as soon as you start making money or paying bills, that's you. Is that correct?


Michael Whaley: That's how I feel about it. Now, granted a lot of people don't do it. But again, it just gives you an idea where you're. And, you know, on a personal financial statement, that's what people fill out individually. Businesses would fill out a balance sheet.


Host: Okay, understood. And can a balance sheet also be used as an instrument when, for example, I come to Heritage and try to secure a loan? I imagine that people that come with a prefilled balance sheet, it makes your lives easier, doesn't it?


Michael Whaley: Much easier. I will still go over it with them, looking for things they might have missed. Maybe they might not have put down the interest rate or payment structure on the loan. Just little things that they'll miss that I can get it done. And then that way, it will speed the loan process up.


Host: Now, you know, I mentioned up at the top the difference between a personal and a business financial statement. Can you just talk about the differences between the two?


Michael Whaley: Well, the main difference is, of course, a personal financial statement, you will put down, again, everything you owe. But if you owe part of a business, you'll put down the value of that business within your personal. A business financial statement does not take into account all your personal stuff, like your 401ks and whatnot. It would be everything that is owned by the business.


Host: Got it. Now, you've probably been working with lots of clients, some might have a balance sheet filled out or understanding of how to do that and some don't. If there's one thing that you know to be true that you wish more people knew about balance sheet hygiene or otherwise, what would you want to share with them?


Michael Whaley: I guess the main thing would be to make sure you put everything down. Don't omit anything. If you don't think it's very important, it may be important to the financial institute to know what's going on with that.


Host: Got it. Yeah. Well, this has been a fascinating conversation, Mike. Thank you so much for your time today. Is there anything else that you want to share with our audience before we sign off?


Michael Whaley: One thing, if you struggle filling out that balance sheet and you're dealing with our institution with Heritage Federal, you can come to me or any of the other commercial loan officers and we can help you get through that thing. And also, just thanks for having me and I appreciate it.


Host: Absolutely. Well, it's so awesome to have a resource in the community like Heritage to help with these things. I can definitely see the importance. So, Mike, thank you so much for the information and for your time today.


Michael Whaley: And again, thanks for having me.


Host: That was Mike Whaley, Agriculture Loan Officer at Heritage Federal Credit Union. For more information, you can visit heritagefederal.org/aglending. If you found this podcast to be helpful, please share it on your social channels and be sure to check out the entire podcast library for topics of interest to you.


Thanks again for listening to Talking Cents With Heritage. My name is Prakash Chandran. And until next time, stay well.


disclosure: Loans may be subject to credit review and approval and property insurance may be required. Membership restrictions may apply. The views and opinions expressed in this podcast are those of the speakers and do not necessarily reflect the views or positions of Heritage Federal Credit Union.