4 Tips to Stay Cash Flow Positive on Your Farm

Posted January 8, 2024 | By: Hollie Rudy

Growers rely on a lot of forecasts that aren’t 100% accurate – the weather, yield projections and more. Cash flow - the movement of money in and out of your operation - is another important forecast that can keep your farm profitable. The amount of cash flowing in or out varies from month to month, so your budget and cash flow projections will never be 100% accurate, but it’s still important to have a solid financial plan that accounts for how cash ebbs and flows – just like you check the weather forecast daily, knowing it’s a projection not a certainty. Here are a few tips to make sure you have positive cash flow.

Know your numbers

The first step to understanding your cash flow is knowing what your numbers are. How much money comes in every month and how much goes out? In farming, we know that every month looks different in terms of expenses and it’s not always easy to predict those changes. Financial flexibility is key to being able to manage your cash flow without added stress. Set some time aside to look at your past performance and project your anticipated cash flow. That way you’ll know your targets to breakeven and earn a profit.

A cash flow budget will help you see the money that comes in versus what goes out, which could include both farm and non-farm transactions. Your cash inflow includes money you receive from sales and other sources. Your cash outflow includes expenses such as labor, services, rent, equipment, inputs, interest, and taxes.

Besides operational expenses, you might want to include other expenses in your cash flow budget. If you pay yourself, count that as an expense. You may want to include living expenses and other non-farm expenses in the budgeting process as well.

Once you have a budget and you’re clear on the numbers, it’s important to treat that budget as a living document that changes frequently.

Evaluate regularly

Cash flow is constantly changing, so you should re-evaluate regularly. Depending on your operation, you may want to review quarterly, or even more often. The larger the operation, the more beneficial it can be to evaluate your cash flow frequently.

With an active farm that needs your attention, it can be a challenge to find the time to work on finances regularly, but assessing your current, past, and projected cash flow will help your business on a path to profitability.

You may also need to re-evaluate your budget if you have a specific scenario or event that’s occurring - say you are trying a new crop, which requires you to stretch for a longer period without generating revenue. Another time to revisit is if you are making big investments, like purchasing new land or equipment. Many scenarios will impact your cash flow, so it’s important to refresh your projections whenever your circumstances or goals change.

Prepare for slower months 

Each month is likely very different for your cash flow. Certain times of year, like the fall when you’re purchasing seed and other inputs, could be more expensive than others. And at harvest time when you sell your crop, those months will likely have more incoming cash.

Be sure to pay attention to months where you expect a large monetary inflow or outflow so you can plan accordingly and leverage any surpluses. Be mindful of your spending. Hang onto the funds to ensure you have the means to pay future expenses and loan commitments.  

Augment where needed

What happens if you don’t actually have the money to cover all your bills each month? This is where pre-planning and being proactive with your budget can really come in handy. If you know your cash is limited, you might consider financing some of your purchases.

Nutrien Financial can help you finance input purchases with fixed interest rates that won’t result in fluctuations in your interest expense, flexible payment terms, and due dates that align your cash flow needs with your crop marketing plans. Having access to cash or financing might also allow you to take advantage of seasonal discounts, which can further help your cash flow position.

By financing some of your purchases, you can balance your capital management strategies by retaining cash. Be sure that you’ve accounted for all the variables if you borrow money. It is important to consider the cost of money in your budget. If you have a variable rate loan and the interest rate changes in the slightest, that amount effects your bottom line and budget.

For more detailed information on cash flow planning and a better understanding between a cash flow budget versus a cash flow statement versus your burn rate, you can download our white paper from NutrienFinancial.com.

Hollie Rudy

Hollie Rudy grew up in Iowa and has a degree in Ag Business with a minor in Accounting from Iowa State University. She has an extensive history in ag banking, credit and finance and has earned a reputation for her ability to find innovative, resourceful and thoughtful ways to help her customers. She is an elected board member at the ISU extension office, an officer with her local saddle club and volunteers for the local fair board and 4-H. Most importantly, she is passionate about her children, who are already young ag entrepreneurs.



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