Improving Driver HOS Compliance

Posted August 27, 2018 by Administrator

Proponents of the electronic logging device (ELD) mandate champion the device as an enforcer of existing rules. While detractors balked at the technology, advocates argued the devices didn’t change the hours of service (HOS) regulations. They contended that so long as drivers were complying with the HOS rules, the device wouldn’t change their day-to-day driving. However, therein lies the problem.

The 14-hour rule says a driver’s clock starts when he or she gets behind the wheel. The clock is a measure of duty time, not driving time, which is where most of the problems begin for truck drivers. While the Federal Motor Carrier Safety Administration (FMCSA) created the HOS regulations with the intent to improve safety, drivers are saying the rules are creating the opposite scenario. ELDs don’t allow for any wiggle room, and drivers are now feeling much more pressure to deliver in a certain time frame. While drivers may be complying with HOS regulations, many contend they are engaging in unsafe driving practices to do so.

For example, drivers who don’t make their destination one day may begin their next day at midnight after a few hours of sleep. Another issue is drivers can’t put a pause on the ELD if they are tired. Even if drivers begin to feel drowsy, they feel compelled to continue driving until their 14-hour allowable on-duty time expires for the day rather than stopping for a rest and picking back up again later that day. This can result in several hours of drivers operating a CMV while tired. Other serious safety concerns include:

  • Drivers rushing through work zones to beat the clock
  • Serious instances of road rage during traffic backups
  • Limited parking while the HOS clock ticks down on an ELD

Compounding this problem are unnecessary wait times. Drivers have long complained about loading and unloading times at shipping and receiving facilities. Now, that time spent sitting counts against their on-duty hours, and drivers are taking umbrage. Opponents argue drivers should charge retention rates for long shipping and receiving wait times, but it’s not always that simple. Many drivers encounter shippers and receivers that refuse to pay retention fees and then switch to a different driver or fleet.

To make matters clear, drivers do not have a problem with ELDs; they have a problem with the existing HOS regulations. Before ELDs, drivers could find a way to fudge their hours. Now, they have no such recourse since ELDs are tamper-proof. Drivers believe trucking associations and FMCSA can resolve most of their problems by addressing the following key areas:

  • Reducing wait times at shipping and receiving facilities
  • Improving parking so drivers aren’t rushing against the clock to find a safe place to rest
  • Amending the HOS regulations

The final point above will require more than proposed changes and rule-making. Truck drivers contend that FMCSA doesn’t understand their industry, and makes regulations about a job they don’t comprehend. Drivers urge lawmakers to get behind the wheel with them for a week to see how HOS regulations are having the opposite intended effect. Truck drivers believe that only by experiencing the job can regulators make smart and effective rulings. To learn more about trucking safety, contact the experts at Cline Wood.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

How to Address Farming Labor Shortages with Technology

Posted August 20, 2018 by Administrator

Farming is a demanding job with often incongruous pay for the hours worked. A major contributor to that problem is an insufficient workforce. With many viewing farming as unskilled labor, it’s hard for farmers to attract and retain reliable laborers. As a result, they have to do more and more with limited resources. As farmers creep ever nearer to critical capacity for working hours, innovators are postulating a workable solution in the form of farming robots.

How Will Robots Help?

Automating tasks is not a new concept. Businesses in every industry are unloading their tedious tasks on machines to streamline their processes and free up the human workforce to focus on tasks that are more important. However, agribusinesses have a harder time translating automation into the field. Now, innovators are addressing this need with robots that can perform physical labor.

Even with pay increases, farmers can’t keep laborers in the field to pick fruits, vegetables, etc. Wages range from $11.50 up to $20 an hour, but this still isn’t enough to attract a stable workforce. As a result, farmers are turning to technology to help bridge the gap between consumer demands and their physical labor limitations. In Florida, a startup company developed a robot that can pick strawberries at the same rates as 30 laborers. It can pick a single plant clean in eight seconds and cover eight acres in one day.

Other Potential Uses for Agriculture Technology

Simple labor is just the beginning of robotics technology in farming. Innovators have big plans to automate harvesting, processing, packaging, and handling grocery logistics. The technology has progressed to the point where a robotic arm has the same dexterity as a human hand. This allows the machine to handle soft foods like tomatoes and grapes without damaging them.

Robotics is poised to disrupt the farming industry; however, the intent is to save farmers time while reducing costs. If your farm is struggling with burgeoning expenses, Cline Wood can help. With years of industry experience, we know the risks involved in managing a farm as well as how to mitigate them. Contact us to learn more about reducing your risk to improve your bottom line.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

Distracted Driving – Keep Your Focus on the Road Ahead

Posted August 16, 2018 by Erin

Deadly rear-end highway accidents continue to be on the rise – but they can be prevented – and we have resources to help you!

According to the National Highway Traffic Safety Administration (NHTSA), distracted driving is dangerous, claiming 3,450 lives in 2016 alone.1 Our Cline Wood University webinar entitled “Keeping Your Focus on the Road Ahead”, presented by Mike Bohon – Safety Representative, Great West Casualty Company, focuses on this critical topic, the consequences of distracted driving, and details how to prevent these types of accidents. We strongly encourage your Safety Director and drivers to review this webinar at your earliest opportunity via our website here, along with other great information located on our Safety & Claims Resources page (click on the University tab, then select Safety & Claims Resources in the drop-down). Thank you for your dedication to safety!

 

1Source

 

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

The Importance of a Driver Employee Referral Program for Trucking Companies

Posted August 13, 2018 by Administrator

In light of the current truck driver shortage, many trucking companies are raising pay as well as using a mix of recruitment strategies to attract new driver candidates. One of the most effective recruitment policy is an employee referral program.

The retention rate of employees that are referred by an existing employee will stay with your company an average of 2.7 years, compared to 1.5 years for candidates that were recruited from job boards. Employee referrals result in the most qualified applicants at a 1 to 10 ratio; applicants recruited through another avenues average 1 to 18.

Some of the most successful trucking companies have employee referral programs. There are several advantages to hiring an applicant that has been referred by a current employee.

  • In general, the time required to interview and check references for a new hire that has been referred by an employee is less – 20 days on average for a referral as opposed to 39 days for someone hired via a job board
  • New hires know at least one person in the company, giving them someone to turn to for guidance and support
  • When an employee refers someone to the company, it helps to retain both the existing employee and the new one

If your company is not using this valuable recruitment strategy, it is a good idea to consider instituting an employee referral program. Here are 5 things to keep in mind as you design a new program or fine tune an existing one.

  1. Who can participate?

Who will be eligible to participate in your employee referral program? Is it limited to drivers, or will you include managers, interns, temps or other staff members?

  1. How will the program work?
  • Will you give a different amount to different types of applicants (i.e. experienced drivers, recent grads, less experienced drivers, students, etc.)?
  • Will you offer a one-time bonus or offer incentives for various milestones, such as the new hire completing their first load or remaining active for 90 days, etc?
  • Will you offer to earn mileage pay for each mile your referred driver covers?
  • Make sure you specify reward amounts and payout timeframe and structure.
  1. How will you track the program?

Set up an applicant tracking system that includes a referral source field (type of referral = employee) and the name of the referrer. Collect any other pertinent information, such as the date of the referral. You can use a simple tracking form such as Google Docs or an Excel spreadsheet to track the information.

  1. How will you market the program?

Consider using the following marketing tactics to get the word out about your employee referral program:

  • Launch party to build excitement
  • Pre and post launch communications in company email, newsletter or other communications systems you are currently using
  • Consider using a SMS texting service to continue to reach out to your existing driver-base
  • Make sure your hiring managers and recruiters understand the program completely and the value it brings the company
  • Don’t forget to let new hires know about the program as they can be a valuable source of new applicants.
  • Hold fun driver referral contests that give drivers an exciting reason to recommend new applicants. The rewards/prizes should be interesting and relevant to drivers. Keep the contest fun and engaging and recognize participants throughout the entire campaign.
  1. Are you using employee referral program best practices?
  • Keep the rules of the program simple and easy to understand. If it’s too complicated, people will be discouraged from wanting to participate.
  • Use an interactive system that makes it easy and personalized for employees, such as setting up a cloud-based referral system.
  • Make sure you follow through on the rewards of the program as promised.
  • Don’t be stingy with rewards – your employees are helping your company and should be rewarded accordingly.
  • Contact the referrers and thank them personally. People really appreciate the recognition and are more likely to refer in the future.

Employee referrals are a powerful source of finding potential drivers. When they have an incentive to make the effort to make a recommendation, your company will benefit with more leads, new hires and better retention rates.

Cline Wood Insurance offers customized insurance, risk products and services that will improve your bottom line. You can depend on Cline Wood to offer solutions tailored to your needs. To learn more about how Cline Wood can help your trucking company, click here.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

How to Reduce the Risk of Salmonella on Poultry Farms

Posted August 6, 2018 by Administrator

The CDC estimates Salmonella causes 1 million foodborne illnesses per year. Of those incidents, 19,000 result in hospitalization and more than 300 end in death. Individuals suffering from Salmonella often experience abdominal pain, diarrhea, and a fever. More often than not, individuals who contract the disease had multiple elements at play such as not cooking the poultry to the correct temperature. However, poultry farmers have a duty to reduce the risk and spread of Salmonella by adhering to best practices on the farm.

6 Ways to Reduce Bad Bacteria Contamination

Bacterial contagions come from a variety of sources. The most common include:

  • Water
  • Wild birds or pests
  • Visitors
  • Farm personnel’s hygiene and sanitation

To stop the spread of Salmonella on the farm, farmers and workers need to focus on the following areas:

  1. Cleanliness and hygiene. Growing houses are a significant source of contamination on farms. Workers need to ensure they clean these areas between flocks to prevent the spread of residual bacteria. Keeping pests such as flies and rodents under control can help with these efforts as well.
  2. Managing water sources. Water is an easy way for Salmonella bacteria to spread from bird to bird. Some tactics that prove effective are utilizing chlorinated water or organic acids.
  3. Reducing dust. Much like water, dust can contribute to the spread of Salmonella. Farmers should aim for dust levels at 3mg per cubic meter or less.
  4. Contaminated grains can result in Salmonella in the final feed product. Farmers should only purchase grain and feed from mills that adhere to rigorous quality control standards.
  5. Encouraging proper gut flora. Farmers need to establish a good gut flora balance in chicks within days of hatching. This can prevent Salmonella from colonizing them. Ways to achieve this include organic acids, enzymes, and yeast technologies.
  6. Cocci management. Coccidiosis is a disease that affects the intestines of birds and causes diarrhea. It also contributes to the spread of Salmonella so farmers need to implement effective controls to reduce instances of coccidiosis.

Raising healthy poultry free from contagion isn’t just a good farming practice; it also helps keep consumers in good health. Salmonella is just one of the risks poultry farmers have to manage. To learn more about protecting your poultry farm, contact the experts at Cline Wood.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

5 Steps to Improved Tire Safety

Posted July 24, 2018 by Administrator

Commercial vehicles need quality tires to remain on the roads and make deliveries on time. However, several factors can diminish the lifespan of a tire as well as reduce its reliability. That is why the Federal Motor Carrier Safety Administration (FMSCA) and the National Highway Traffic Safety Administration (NHTSA) collaborated with the Commercial Vehicle Safety Alliance (CVSA) to develop several simple tips for tire safety encompassed by the acronym TIRES.

Commercial Tire Safety Tips

The above U.S. DOT agencies realized several factors increased the likelihood of tire failures such as pushing tires past their speed rating, increased front axle loads, and more. The following suggestions can help drivers eliminate most tire problems.

(T)ire Inspection

Drivers should check their tires every day and report any of the following to a mechanic:

  • Foreign objects (i.e. nails, screws, etc.)
  • Cracks
  • Cuts
  • Bulges
  • Uneven tread wear
  • Insufficient tread depth
  • Other damage

(I)nflation Pressure

Overinflated and underinflated tires cause uneven tread wear. It also reduces fuel efficiency, which adds up and eats into profits over time. That is why drivers must gauge their tires while they’re cold before any trip and make adjustments as needed. Checking tires after driving them can lead to inaccurate results and cause improper inflation.

(R)ims

It’s of critical importance that drivers only pair compatible rims and tires. Mismatched parts can explode, leading to significant injuries or fatalities.

(E)xtreme Loading

Tires can only carry so much before compromising their integrity. Drivers should never overload their vehicles because it causes the tires to overheat and can lead to structural damage and outright failure.

(S)peed

Every tire has a unique speed rating. Drivers need to stay at or under this limit to avoid damaging their tires, which can shorten the tire’s lifespan.

Tires are an expensive component that require proper care and maintenance. Otherwise, drivers will find themselves replacing their tires more often than necessary, costing them more money. Improper tire maintenance also poses a significant safety risk so tire maintenance is an imperative element of transportation safety. To learn more about improving your trucking company’s safety, contact the experts at Cline Wood.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

How to Curb Digital Addiction in Your Fleet

Posted July 16, 2018 by Administrator

Driver safety is paramount to a fleet’s success. However, no amount of safety devices can contend with a distracted driver. Over one-third of millennials check their phones at least once per hour compared to 21% of the rest of the population. In fact, most people check their phones upward of 100 times per day.

The Problem with Digital Dependency

Being tied to technology creates a multitude of problems for drivers; however, the greatest is its effect on sleep. One survey found that over half of respondents slept with their phone next to their bed, 13% slept with their phone in their bed, and 3% slept with their phone in their hand. This creates a sense of urgency for every after-hour text, phone call, or email.

New messages disturb sleep and make employees feel like they need to respond right away. Driver fatigue is one of the known leading causes of accidents and fatalities in the transportation industry so it behooves fleets to get serious about how attached drivers are to their phones.

Finding Solutions to Improve Safety

The simplest solution to the reliance on cell phones is to stop multitasking. The vast majority of people who attempt to multitask fail to be effective. For example, drivers know they shouldn’t text and drive or talk on the phone and drive. However, a ping of a new message or phone call is often a tempting lure. Drivers can download apps that prevent non-urgent texts and emails from coming through, but the problem is not just with drivers.

Fleet managers often send the wrong signal when it comes to cell phone usage. For example, if a manager checks his or her phone several times during a conversation with a driver, that individual will likely feel like the manager isn’t paying attention. This can create a negative cycle where employees don’t bring forward problems or concerns due to a perceived lack of interest from management.

Managers should also pay attention to when they send emails. It may be a manager’s preference to send emails after hours, but this practice can make employees feel pressured to respond even though they aren’t on the clock. If this is the case, managers should set clear expectations that they don’t expect employees to read or respond to emails sent after hours until the following workday.

Technology isn’t going to go away or slow down anytime soon. However, how fleets and drivers manage their use of it has a big effect on overall safety. If your fleet is struggling with transportation safety, contact the experts at Cline Wood to learn how we can help.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

Will Driver Pay Incentives Bring Needed Changes to the Trucking Industry?

Posted July 9, 2018 by Administrator

Some motor carrier fleets claim they have implemented dramatic changes to their compensation packages. But adding monetary incentives is not a unique idea. Granted, pay increases attract new, younger drivers and help to retain seasoned workers at a time when the need for drivers is skyrocketing throughout the trucking industry.

Many fleet professionals believe that a higher rate of pay is critical in order to solve the driver crisis. Furthermore, performance bonuses help to ensure quality of service and provide drivers with a reward for exemplary service.

A stronger economy, coupled with regulatory changes, is helping to drive the increased demand for higher wages. Drivers are leaving the profession at a rate faster than they can be replaced. Baby boomers are reaching retirement age and younger people in the workforce tend to have far more career options than the baby-boomer generation had.

The flow of drivers out of the industry and lack of enough drivers entering the profession has created a situation where drivers are in a position to demand better pay and better working conditions. Drivers want more than a pay-per-mile increase; they want total compensation and benefit packages that include sign-on bonuses.

These days, bonuses for the following are becoming increasingly popular as recruitment tools:

  • Safety
  • Miles driven
  • Tenure
  • Minimum weekly rates
  • Layover and vacation pay.

Drivers must deal with a great deal of stress while on the road, often due to increased regulations, shipper and receiver delays as well as tighter schedule demands.

However, while fleet owners understand the pressure placed on drivers, and appreciate that drivers deserve higher rates of pay, other factors, such as stagnant freight rates, has forced the industry as a whole to keep driver compensation static.

Rising freight rates are helping fleets make up the difference between escalating wage increases and budgetary constraints. As demand for motor carrier drivers continues to expand, some companies have become so frustrated they are reducing their workforce and lowering their productivity levels.

Drivers cite a myriad of issues that are placing barriers to recruiting new workers, including:

  • Paying drivers on a per mile or per-hour basis instead of salary
  • Failing lines of communication with fleet management and owners
  • Lack of sleep
  • Time away from home
  • Unpredictable miles
  • Ineffective administration
  • Spending time looking for trailers
  • Being detained for long load and unload periods of time
  • Poorly-set appointments
  • Lack of respect for their work.

Individual fleets need to look at their own workforce and find out why their drivers are not being retained. Generally, the highest turnover rate is in the first few months following a hire. Fleets suffer because the onboarding process is expensive. In order to help reduce a high rate of turnover in the first few months, make sure you target and attract the right potential employees. Increasing wages may help to attract new drivers, but they won’t stay if they can’t handle the lifestyle and frustrations of the job.

Fleets need to think about what it takes to attract millennials. Many will demand longer vacation times as well as earning a fair living wage despite clocking in fewer hours. There is still much work to be done to improve the market for attracting and retaining qualified, high-performing younger drivers.

Cline Wood is more than just an insurance agency. We tailor insurance and risk products and services that improve your bottom line. As a Cline Wood client, we care about your business; you can depend on the knowledge and experience of Cline Wood to help analyze and solve your needs. To learn more about how Cline Wood can help your trucking business, click here.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

HOS House Bill Proposes to Alter Regulations for Livestock and Agriculture Haulers

Posted July 2, 2018 by Administrator

There have been a series of bills proposed this year that target Hours of Service (HOS) reforms in response to the Electronic Logging Device (ELD) mandate that went into effect in December 2017. The latest bill, filed in the U.S. House of Representatives on Thursday, June 21, 2018, aims to reform the regulations for livestock/agriculture haulers. The bill would also allow the Federal Motor Carrier Safety Administration (FMCSA) to move faster on any rulemaking that would provide drivers with split sleeper berth flexibility. The new rule would make it faster and easier for drivers to maintain records under the ELD mandate.

The new bill, called The Honest Operators Undertake Road Safety Act (H.R. 6178), was introduced by Representatives Sanford Bishop (D-Georgia), Rick Crawford (R-Arkansas) and Bruce Westerman (R-Arkansas). The bill is the first to be backed by the American Trucking Association (ATA) this year. The ATA announced its support for the legislation on Thursday.

The bill targets the livestock and agriculture hauling sector specifically, like other HOS reform bills filed recently. This bill provides relatively small reforms, instead of a complete overhaul of the HOS rules and regulations. The HOURS act would provide exemptions to truck drivers that are hauling livestock and agriculture commodities, allowing them to be exempt from HOS limits and duty status records. The bill, if passed, would apply year-round as long as the driver is within a 150 air-mile radius of the source of the livestock or agriculture product. Some of the other bills have included time-limitations during state-designated planting and harvesting seasons.

A big part of the HOURS Act is the reduction in supporting documents drivers would be required to maintain. Current regulations require drivers to keep at least eight supporting documents on hand for the previous 24-hour work period. HOS supporting documents include:

  • Fuel receipts
  • Bills of lading
  • Dispatch records.

The new regulation, if passed, would allow drivers to legally maintain only two documents per day, one verifying their start time and the other the end of their workday. The bill would also allow FMCSA to permit more flexible split sleeper options, such as 5-5, 6-4 and 7-3. Current regulations dictate a strict split sleeper berth time to 8 and 2 hours, for the required 10 hour off-duty period every 24 hours.

If FMCSA does propose a rule to alter split sleeper times, the HOURS Act would allow the agency to skip the required process of rulemaking and move directly to rule proposal and accepting public comments.

The HOURS Act would directly impact short-haul as well as long-haul drivers. A short-haul driver is defined as someone who operates within 150 air-miles of their work reporting location. Under the proposed bill, short-haul drivers would be exempt from HOS regs and the ELD mandate if they complete their work day within 14 hours. Current regulations allow this only for non-CDL drivers operating under the short-haul exemption.

To learn more about transportation industry news, trucking coverage and risk management, contact Cline Wood here.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

How to Manage Financial Risk on the Farm

Posted June 26, 2018 by Administrator

Managing a farm is a risky venture. Farmers can encounter production problems, environmental hazards, and financial risks. In fact, recent years underscored just how dramatically farming finances can fluctuate. From 2011 to 2014, farm income averaged $105 billion annually. By the close of 2015, this number plummeted to $56 billion. In an environment where profits can decrease by almost half in a short span of time, farmers need a solid plan in place to survive economic difficulties. The following suggestions can help farmers stay afloat during periods of financial uncertainty.

  1. Always pay attention to the little things. In prosperous times, it’s easy not to worry about the small stuff. A few extra dollars here, not getting the best deal there—it’s not concerning when cash flow is positive and ledger margins are in the black. However, when crunch times strike without warning, these behaviors will make a difficult situation worse. Making every dollar every day count can be the difference between surviving an economic downswing and folding under the pressure.
  2. Develop a reliable accounting system. Farmers can’t hope to build a successful agribusiness if they don’t track their finances with an appropriate system. Investing in enterprise accounting software can help farmers manage accounts payable, accounts receivable, billing, payroll, and more.
  3. Don’t rely on the value of the land. When the value of goods and services goes down so too does the value of land. Not only that, but land is not a liquid asset. Farmers can’t easily convert land into cash, and a rapid sale can result in a loss of profits. In addition, banks are less than impressed by real estate as a means of repaying loans. Instead, farmers should focus their efforts on products and services that generate cash so they can pay down debt.
  4. Make decisions. When the economy begins to turn, family businesses such as farms often feel the squeeze before major organizations operating on huge margins do. Many farmers feel crippled by the fear of making a wrong financial decision. However, inaction can prove much more lethal to a family farm than action can. For example, lenders will grow frustrated and less willing to work with farms that skirt their inquiries than those that at least respond. A willingness to navigate an uncertain future is much better than remaining frozen during an economic storm.

Managing finances on tight margins isn’t easy, but Cline Wood can help. As a top provider of agribusiness insurance, we go beyond providing coverage. We work with agribusinesses to understand their risks and implement strategies to manage them during difficult times. Contact us today to learn how we can help your agribusiness.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

Copyright © 2019 Cline Wood.