Cashflow planning for farms
1st February 2016 by Jonathan Wingfield
For most farms this is the point of the year when things are a little more settled, with most of the drilling complete (or done in some cases) and the sprayer/fertiliser spreader resting in the shed. So now presents a rare chance to consider the path ahead, what I am about to suggest isn’t the most loved job for most but reviewing the financial position for now and the forth coming year is a sensible thing to do. That is if you haven’t already done so.
With crop prices staying low and most costs staying the same or increasing it may well put a squeeze on the Cashflow in the coming months. I have seen many articles written when times are hard, the underlying suggestion of most is try and spend less and get more money in! However it is likely that little can be done to rectify the price you receive for your crop, or what needs to be spent to look after those growing in the field but planning the Cashflow ahead does highlight where the pinch points are likely to be. If you find that you will need additional funds, this allows you to confirm this position early with your bank manager, who will normally respond far more favourably to you being pro-active rather than re-active. Currently the rates that have been offered for farm lending are still low but do consider the overall position and include arrangement fees and cashback schemes when calculating the rate of borrowing.
The pinch on cash is unlikely to have been assisted by recent tax bills, rent payments falling due and the new Basic Payment Scheme. If you are yet to receive your payment and are in need of cash a number of bank managers have advised that lending specific to the shortfalls caused by the late payment of BPS can be offered, however this would not be available if the loan was to cover other cash short comings from the business (so no using it for a nice new bit of kit), so do consult with your manager.
If you are worried about the cash within your business but are unsure how to complete Cashflow forecasting, do liaise with your accountant who should be able to produce the figures with you (this process would certainly involve discussions between you and your accountant) and discuss with you what this means. It is certainly a case of fore warned, fore armed.
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