Building a balance sheet banks can trust

A balance sheet consists of three main components, namely assets, liabilities, and equity, effectively reflecting what is left over for you as the owner

- Cobus du Plessis.

In the journey from smallholder to commercial farmer, understanding your farm’s finances is just as important as understanding soil fertility, animal health, or crop production.

Many farmers focus on production and sales, and rightly so. But as a farm grows, lenders and investors want more than evidence of good harvests. They want proof that the business is financially sound. The balance sheet is one of the important tools for providing that proof.

In previous articles in this series, we examined cash flow management and the income statement. Cash flow tells you whether you can pay your bills today. An income statement tells you whether your farm made a profit or a loss the previous year.

But if a bank manager or investor wants to know whether you are creditworthy, they would require your balance sheet. This is the document that shows, at a particular point in time, everything your farm owns, everything it owes, and what is left over for you as the owner.

WHAT IS A BALANCE SHEET

A balance sheet is a snapshot of your farm's financial position on a specific date, typically the last day of your fiscal year. Unlike the income statement, which covers a period (for example the year ended 28 February 2026), the balance sheet is a single moment in time: As at 28 February 2026.

A balance sheet consists of three main components:

ASSETS

Assets are split into two categories based on how quickly the asset can be converted into cash:

• Current assets (short-term, convertible within 12 months)

• Cash and bank balances;

• Accounts receivable (money owed to you by buyers);

• Inventory: stored grain, fertiliser on hand, seed stocks;

• Prepaid expenses (for example insurance paid in advance);

• Short-term investments.

Non-current assets (long-term)