Improving the cash flow of your farm doesn’t need to be difficult. In this blog, we take you through a brief introduction of what cash flow is and why it’s important.
As a starting point, let’s talk about the importance of cashflow forecasting and preparing a cashflow budget, because without these, how do you know how your cashflow is going to look?
The first thing we do with our clients at Lifesolver is get an understanding of what’s happening on the farm from a production perspective. This could be things such as the number of cattle being sold, crops, wool, wheat, cotton – the list goes on.
Based on the activities that are occurring on the farm and the likely prospect of selling, we can work out the income projections. First, we look at the costs associated with putting in pasture, preparing for cropping – fertiliser, seed, etc. This helps us get a good understanding of how things are going to look from a cashflow perspective, and once we’ve got an understanding of that, we can start making projections.
By looking at our projections, we can then find ways to improve the situation. We can do this by making purchases at the appropriate time and potentially delaying purchases until the time that those inputs are required.
From an income perspective, we can then look at what can we do in terms of bringing cashflow forward. Some farmers are using on-farm grain storage to improve the cashflow overall, and while we may not be getting the money in at harvest, we are in a position where we can market the grain post-harvest and hopefully get a better outcome.
There are plenty of strategies we can use to help improve your cashflow. At the end of the day, what’s really important is your time – by that, I mean making the time to step outside of the day-to-day running of your farm and contemplate what can be done to improve your situation strategically, rather than getting caught up in the day-to-day operations and missing important opportunities.
Some of our farming clients are using Figured, which is a tool that farmers use in conjunction with Xero. There is also Phoenix, Cashbook Plus, Agrimaster, P2P Agri and other products out there that can be used to assist with cashflow.
If you have any questions or you want to share the ways that you improve the cashflow on your farm, we want to hear from you.
As we say here at Lifesolver Financial, having a second set of eyes look over your plan is never a bad idea – they might pick up on something important you’ve missed or an opportunity you didn’t see.
Want us to take a look? Contact the team at Lifesolver Financial. Leveraging over 30 years of experience working with farmers, our team can help you with everything you need to achieve farm business success and a bigger future. Call us on (02) 5750 0519 or reach out to Matt: Info@lifesolver.com.au
*This blog/article is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. If relevant: Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
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