In recent years, our farm started selling a few products and services — some hay, some dirt work, small projects for neighbors. Now, I’m dealing with trying to get paid, which sometimes is frustrating. I’m not used to having to collect money in my own business. Any thoughts on how I can handle this without feeling constantly frustrated with some of these people?  
— C.M., Illinois 

Most businesses — think of roofers, window installers, etc. — must send invoices to their customers to receive payment. It’s already a regular process for those businesses. 

In farming, sending invoices isn’t a typical part of the business because we mainly sell what we produce on the market. Moving into a “retail role” creates a different dynamic. The key is creating your own business policies to set and manage expectations  
with customers. 

If frustrated by your farm’s accounts receivable, you may need to put a policy in place to set consistent, clear expectations with your customers. First, establish what your policy is with your customers — both verbally and in writing. This adds clarity, which helps eliminate assumptions  
for both parties. 

Next, have a simple internal system to create and send out invoices. You might also decide that some types of work require cash upfront. Such a process can ensure everything gets invoiced, which keeps it from becoming a mental burden. Set up a pay period and decide whether you will charge a small interest fee on late payments — just be sure to clearly communicate it. 

Clarity of understanding is the biggest factor in managing and improving relationships. Make sure you don’t have assumptions about how your customers are going to behave, and don’t leave them to assume what you expect of them. 

Each year, we’re spending more on our farm for outside providers, whether it’s applications, mechanical work or other areas of expertise. What are you seeing with farmers on doing a job in-house versus hiring it out? — N.W., Iowa 

For many businesses, answering this question means figuring out:  

Your calculations probably involve timing and, more importantly, trade-offs. Everything that we choose to do through our farm is a decision to not do something else. 

Generate a list of tasks that make the best use of your time and energy — things only you as the owner and leader can do.  

You may be frustrated in how much you’re paying others to perform operations and wonder whether you can do it in-house more cheaply. 

As a farm grows, one of the advantages is the greater ability to spread fixed costs over all your sources of revenue. That’s a major trade-off. Our advisers run financial analyses for our farmer-clients to help them determine the trade-offs and returns for their farm when bringing something in-house versus hiring it out. 

This is the same type of calculation manufacturers must make. Look at Dell, a company that no longer produces computers. It focuses on mastery in design and marketing, and then hires other companies to manufacture its products. 

From a strategic standpoint, what are the critical few things your farm must master? When can you hire outsiders with expertise? When does it make sense to bring something in-house? 

It can be helpful to shift our focus about what we’re doing on our farm and our role as a farm leader. It’s primarily about creating a production system. 

When we’re determining what we’ll do and what we’ll hire others to do, we have to consider both talent — what we’re good at and what others are better at — and timing — whether we or others can do it in a more timely manner.  

Frye is president and CEO of Water Street Solutions.