10 Resolutions for 2025 - Employee Evaluations and Equipment Purchases

I have been posting this year about 10 farm resolutions for 2025.? This has triggered various surveys on X to figure out how many of my followers are implementing these.? This week I did a couple surveys related to resolutions 5 and 9:

The 5th resolution is doing employee evaluations. ?

Ensuring you have proper HR policies and procedures in place is critical for a successful farm.? Unfortunately, my survey paints a picture that requires a great deal of work.? Of the farmers who responded; nobody has formal employee evaluations and are learning from them.? The remainder either had employee evaluations and nothing changes; or don’t have any at all!? This is a significant area that farmers should be working on as it is the difference between having a reliable workforce and struggling to find people.

The 9th resolution is developing an asset purchase plan.?

This isn’t a formal procedure that I have, rather it is a discussion that I have with farmers to discuss how they are going to finance their next purchase.? My discussion here is strictly about optimizing tax deductions and not whether the machinery is needed.? This is a different part of this analysis.?

1. Most farmers are using cash to purchase their next piece of equipment.? As we are coming off of the 100% immediate deduction years; this could put a farmer into a tax problem as they are using their cash on purchases that aren’t 100% deductible;
2. The second most popular choice was to finance the purchase.? This may be the right option depending on the specific situation as it doesn’t require use of the farmer’s cash.? However, it comes down to the cost of debt and the discount that may be offered to pay cash;
3. Leases was the third most popular option.? In my opinion; there are 2 types of leases – operating and capital.? Generally operating leases are used to conserve cash by putting payments over a longer period of time while capital leases are structured to front load payments to get tax deductions faster than CRA’s declining balance policies.? It is critical to watch the cost of debt in capital leases as it isn’t always beneficial to chase tax deductions by paying higher interest costs.? In my experience, the cost of debt for most leases has come down significantly over the past 20 years and can be very similar to finance interest rates.? If a farmer is tax adverse and has used all the other tools available – ie. deferrals and prebuys – capital leases could be another option to reduce taxes; and
4. Finally, the last option are farmers who have no idea.? This is where a conversation with your advisor is critical to go through the thought process of what is best to optimize tax and manage cash flow.

Here are all of the 10 resolutions for 2025. Check them out and consider implementing them on your farm!