Cashflow management can be difficult in all walks of life. However, with new trading structures becoming increasingly popular in the agriculture industry, it becomes harder to track where your cash is going or how much it’s actually worth to you.

There are a number of things to consider when thinking about your cashflow and the year ahead. A cashflow budget – knowing what goes in this and getting a grasp on personal drawings – is an excellent way to get to grips with your farm income and expenditure.

1 Prepare a cashflow at the start of the year

Preparing a cashflow can seem time consuming and unrealistic, however, putting a plan down on paper can be invaluable for both peace of mind and giving a farm options for the year. ?No matter the type of farming enterprise, there is always a project going on. Be it small or big, there is a new one every year that can go under the radar and cause the bank balance to take a hit without you noticing.

Income for your business changes every year depending on the world markets and the quality and quantity of the product you are selling. This can make preparing a cashflow difficult, but it is still important to put these down on paper to allow you to plan for that slatted shed or new tractor you’ve been planning for a few years.

2 What goes in the cashflow?

Everything from top to bottom goes into your cashflow planner; all income and expenditure on the farm. If it’s a developed system, using last year’s accounts is a good starting point here. For an expanding business, it is important to allow extra income and expenditure for these or discount back if winding down.

Drawings from the farm can vary, but a rough estimate for the year will be a good guide. A provision for tax should be included – was the year prior a good year for profitability? Depending on your trading structure it may be wise to overestimate tax a small bit to prepare for that rainy day.

It is very important that loan repayments are included in a cashflow. These are going to be constant and, depending on the term of the loans, can also allow you to plan for the future if there are loans dropping off or new loans being taken on.

Lastly, do you have merchant debt hanging over you from last year? Is it going over the two-month credit limit and do you need to factor extra repayments to the merchants in this year’s cashflow to catch up with overhangs from last year? Including all of the above will give you a rough guide as to where your bank will end up at year-end and allow you to plan for this.

3 Steps to allow for easier cash tracking

Depending on your trading structure, a farm business can have multiple bank accounts and can be very hard to track. A farm business should be able to operate out of one set bank account to allow for an easy understanding of the finances, making it easier to track. Drawings can affect the amount of bank accounts held within an entity and can cause confusion when sitting down to start a plan.

If the farm is run by a husband and wife, how many bank accounts should there be? A husband and wife should always have their own bank accounts, in my opinion. It’s nice to have that freedom of spending your own money that you have earned through hard work on the farm – be it doing the books, milking the cows or setting the barley.

If the farm is a sole trader, partnership or company it should have a bank account in its own right too. This will allow for better cashflow, profitability and tax planning. It may seem an obvious option, but you would be surprised by the number of bank accounts held by different businesses.

Jerry O’Neill is an ACCA qualified accoun­tant working as an agricultural consultant with Brady Group Agricultural consultants and Land Agents. Please send your finance queries to

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