Cash flow is important to any farming operation. But you can’t just monitor your pennies and dimes. You must plan out your cash flow and prepare for changes in your plan along the way. Farmers should be working with their accountant to set a budget and execute cash flow forecasting. This exercise allows you to see how the money coming in and out of your business may ebb and flow while also shining a light on the effect of factors such as credit policies, balance sheet transactions and seasonal variations.
Arming yourself with a budget to follow and a cash flow forecast will set you up for long term success and allow you to react quickly and properly to financial surprises and bumps in the road. Your accountant will help you remain realistic as your focus on budgeting. As an accounting professional, they will help you base your budget off numbers from the past and the future… meaning the previous financial success of your operation and your projected growth to come. Part of the budgeting process will be estimating the expenses and income for the farm. These estimates are invaluable and can be created by looking at data from years past and at current and projected market prices.
Ideally, your budget should be based on a certain time frame. Likely this will be your fiscal year. However, monthly and quarterly budgets are also an option. Your accountant will likely be using a sophisticated accounting software to help drive these exercises. Having an accountant with extensive experience in the farming industry helping you with these matters is absolutely the way to go. You need someone who understands your industry and unique challenges.
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