We all want to succeed on our farms, whether you run livestock, have broadacre crops, run an orchard, grow vegetables on a three hectare lot or are involved in one of the many other primary production sectors.
The cash flow generated by business operations is the amount the business has available to repay loans, pay tax, drawings of the proprietors, invest back in the business and invest outside of the business. Without adequate cash flow, a business cannot pay creditors and may be placed in receivership. Unless the business generates an adequate cash flow, it cannot continue to operate, and the business is not viable. Cash flow budgets are a vital tool in organising the financial needs of the business.
Developing a monthly cash flow budget for the financial year using actual farm production and inputs data, allows for different options and scenarios to be incorporated into each cash flow budget. With the aid of computer programs and spreadsheets a Rural Financial counsellor can assist you to examine the peaks and troughs of the cash flow of the business, and review the needs of the business at these times of surplus and deficit.
Once a monthly cash flow budget is generated, they can be used for projected periods going forward. Many government concessional loan programs and bank loan applications require three year cashflow budget forecasts. A cash flow budget forecast is there as a guide to the business. The budget can be adjusted if needed, as unforeseen events may impact the business both positively and negatively.
Your local Rural Financial Counsellor can help you with the preparation and the interpretation of your farm business enterprise and financial budgets.