Preparing for Your Annual Review

Preparing for Your Annual Review

Article By: Cathy Asher, Relationship Manager for SFB

With the end of the year fast approaching, now is the prime time to start planning for the annual review for your lending relationship with your banker. Understanding what information the bank needs and why can reduce some of the anxiety you may be feeling. 

There are three key pieces of information needed for your review. They are collected in stages and per your loan agreement, need to be submitted within 120 days of the prior year-end. SFB generally sends out notifications requesting the information, but you are welcome to provide them at any point after they're completed. In order to provide a meaningful review, it is important that the information be accurate and timely. Your balance sheet, tax return, and cash flow projection are all keys to positioning your farm business favorably in the coming year. 

The first piece of information submitted to the bank is your balance sheet.  We generally send you a request as well as a copy of the previous balance sheet provided to us, during the last few weeks of the year. The goal is for our clients to update the balance sheet with current figures as of 12/31. Timing is everything; reporting figures outside this timeline can create errors in the analysis. Cash balances and prepaid expenses are examples of common reporting mistakes.  Clients will often report their cash balances based on what is in their account per their online banking. However, there are times where checks are written prior to year-end for prepayment of next year's expenses in order to reduce tax liability for the current year. These checks may not have cleared the bank yet. The cash balance you report on your balance sheet should be reported as if they had cleared. Likewise, please include any prepaid expenses such as seed, fertilizer, etc. that have been paid for the coming year along with any deferred financing arrangement used to make those purchases. Please submit your balance sheet by mid-January if at all possible. 

The last two key reporting components involve the tax return.  When submitting this information, we need the complete Federal return along with the depreciation schedule. We review the return not only for farm-related income and expenses but also for personal income. There are sources of income not include on Schedule F such as cull cow sales or timber sales that could impact the income of your operation that we want to account for in our review. SFB utilizes an income detail sheet that is sent with the reminder to submit your tax return. The detail sheet allows us to better understand Schedule F income sources as many times income from grain and milk are commingled. This detail sheet also requests information for the coming year related to livestock numbers, cropping plans, and any planned purchases. Having this information allows us to assists with creating a cash flow projection for your business for the coming year. You can bring your return to the bank for copying or request that your tax preparer provide it to us on your behalf. Please submit your return and projection no later than April 30th.

Collection of the financials for your business allows your lender to analyze trends in your business as well as identify future opportunities. Providing this information timely allows us to react more quickly when you have a lending need.  Our loan policy and the bank examiners require us to collect these financials on an annual basis.  We thank you in advance for working with us to ensure the best possible review of your operation. 

Cathy Asher is a relationship manager and serves on the Agriculture Banking Team for Security Financial Bank. She can be reached at or at 715.672.2410 .