Cashflow management on the farm – how it can help your business grow
20 May 2020
The importance of cashflow management is more apparent than ever and although most farmers we speak to say the COVID-19 restrictions haven’t affected them too much from an operational sense we are all holding our breath to see what affect it has on commodity prices into the future.
Traditionally we would say farmers haven’t seen a great deal of importance on completing cashflows. However in the past few years, we are seeing a shift in this mindset, particularly since the banking royal commission and the increase in land prices.
Gone are the days of completing a budget for the season, generally with your banker to get additional funding and putting it in the filing cabinet. With the accounting software providers and agriculture specific apps, it is now much easier to record your farm production data and complete meaningful budgets that help you achieve your business goals.
These budgets are used to reflect upon, make changes as the season progresses so your advisers can help you make informed business decisions. They can be used to help you answer questions; ‘Should you invest in plant and machinery?’, ‘Can you buy more farm land?’, ‘Should you lock in a forward contract now?’. They can also help you communicate with your lender so you can reduce your risk margin (lower your interest rate) or just additional funding. The bank need to see your thinking, your plan and what the results are expected for the decisions you are making. If you can show that you are prepared, with well thought out scenarios and confident in your decisions - that is half the battle ‘won’.
We recommend Figured for your cashflow management needs. Figured is an agriculture specific cashflow management tool that uses the transactional information from your Xero Accounting file to produce farming-specific management information. Figured helps you record your production information, for example it tracks livestock movements including births and deaths, and cropping production information such as hectares sown and yields. Figured automatically updates from Xero to allow comparisons between the budget and your farm’s actual results.
Figured not only enables you to record and analyse your production results and your cashflow performance, it gives you clearer insight into your business growth to help your financial security in the long term.
Contact Rachel Trickey
at Mulcahy & Co Agri Solutions
to get your farm cashflow projections sorted.
Call 03 5330 7200
or email rachael@mulcahy.com.au.
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