Is budgeting on your list of New Year’s resolutions? Now is the time to do a budget for the year ahead.

A monthly cashflow budget detailing the money in and the money out will very quickly identify weak points in the business.

The first item of expenditure to go into the budget is drawings. This is what you need to take out every month to live on.

The difference between the outgoings and income is the surplus or deficit.

Then put in the other essentials like what you need for loan repayments, labour, land rent, electricity, etc.

Then identify the things that you need to buy or pay for that month to run the farm, eg feed, fertiliser, diesel, contractor and so on.

The difference between the outgoings and income is the surplus or deficit. The hard part is to accurately determine the income as we don’t know the milk price in advance.

I think it is better to be conservative on both output and price. At the moment, I’d be budgeting for around 30c/l base price in 2018.

You should be able to make accurate assumptions of volumes by looking at last year’s output and increasing or decreasing based on the age of the herd and stock numbers.

By doing a budget, you have a clear vision of the business in the year ahead.

Question each cost. Ask yourself if (a) it is necessary, (b) you need as much of it, and (c) can it be gotten cheaper?

By doing a budget, you have a clear vision of the business in the year ahead and can plan payments and investments accordingly.

Reconcile actual with budget at the end of every month. It might seem like an awful chore, but it’s no coincidence that those who routinely budget are rarely short of money for what they want.

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