Cash Flow and Financial Management on Farms
Volatile market conditions combined with unfavourable weather conditions can have a severe impact on and ruin plans on farms. There can be major implications for cash flow and have major implications for cash flow.
- Act early, even the best farmers' plans and schedules may need adjustment. Delays could cause the situation to deteriorate and cause stress
- Be realistic and up front when developing your cash flow plan using the worksheet
- Consult and draw up a plan with your Teagasc advisor, Agricultural Consultant or accountant. They have the expertise and experience to help you develop a Cash Flow plan for your business
- Decide on a course of action use a cash flow plan to form the basis of negotiations with suppliers and banks. Creditors respond best to realistic budgets and up-to-date cash flow projections supported by the farmers own records and accounts.
- Complete the simple 5 minute Cash Flow Sheet.
- To get a more comprehensive overview complete the Current Debt and Cash Flow Projection Worksheets.
- Contact your advisor or accountant if you feel a more detailed monthly plan is required.
Options if cash is tight
The main priority is to minimise non-essential spending until cash income improves. The main areas to examine to help bridge the gap between income and spending are:
- Prioritise essential living expenses.
- Eliminate all non-essential expenditure- both farm and personal spending
- Review Financial Repayments
- Review monthly pension, savings and life assurance payments
- Talk to your accountant NOW regarding Tax
- Involve all family members in analysis & solutions where possible.
Methods to bring in Cash
- Sale of trading stock or surplus breeding stock.
- Sale of non-essential machinery
- Cash in policies/savings - Take advice from your broker/ accountant on this.
- Off-Farm income/husband/wife.
- Examine sale of assets in extreme circumstances
- Look into availing of Social Protection payments - Farm Assist, Family Income Supplement, Pension entitlement.
Cash flow management is central to business success. In good price years, it is important that cash flow is managed to build a cash reserve and to undertake necessary on-farm improvements. In poor price years, cash flow must be managed to ensure that all essential bills are paid (including living expenses) and that no long term damage is done to the business due to a cash shortage.
Creating a cash flow budget can appear a daunting task. The ‘5 Minute Cash Flow’ is an ideal way to start improving your financial management. Remember that budgeting is not an exact science but that in most cases a ‘best estimate’ is better than ‘no estimate’.
Download - The 5 Minute Cash Flow Planner