With fertiliser prices reaching never-before-seen highs, and the cost of fuel soaring, it’s no wonder many farming businesses across the region are concerned about immediate cashflow in the lead-up to seeding.
In addition to this, staffing issues continue to be a huge challenge for many of our clients across the Esperance and Ravensthorpe regions. Supply and demand dictates wages meaning workers are demanding more than the award rate, and farmers are needing to pay these rates to get the job done.
Experts cite Russia’s invasion of Ukraine and the associated trade sanctions, atop the long-term impact of COVID-19 and its associated supply shortages as the cause of searing productions costs. Whilst these productions costs may be eased in the longer-term by increased demand for Australian wheat and grain, how can agribusinesses navigate their cashflow in the immediate term?
One useful tool for planning and allocating your cash is the use of a cashflow budget.
Your cashflow budget is one of the strongest tools in your agribusiness arsenal
Cashflow
Cashflow forecasting is the estimating of future sales and expenses. Your cash flow forecast will tell you if you have enough cash to continue running your business, and if you have the cash available to expand it. It will also show you if more cash is going out of the business than coming in.
A cashflow budget should form an integral part of your farm management processes, and not just as a static document you refer to from time-to-time. Your cashflow budget should work for you as a forecasting tool, showing you real time projections for cash surplus and shortages for the year.
Although cashflow budgeting only looks at money movement, not net income or profitability, it’s a vital management tool because it:
- Helps you to make informed decisions
- Tests your farming plans, such is if you have enough income to meet your immediate cash needs
- Projects how much operating credit you will need
- Projects when loans are able to be repaid
- Helps you communicate your plans and requirements to banks and lenders
While a lot of farming businesses across Esperance and Ravensthorpe have a cashflow budget in place, many aren’t using it to its full capacity. Never has there been a more important time to maximise your usage of a tool which will help you to plan for seeding and beyond, in the face of rising production costs.
Cashflow Planning for Agribusiness is one of Smith Shearer's Business Advisory services available for you to make use of. If you are not currently utilising cashflow forecasting, let me know!
Make the most of your cashflow budget
If you’d like help with creating or reviewing your cashflow budget, or if you’d like one-on-one coaching in learning how to make the most of your cashflow forecasting tools, fill in the form below and I'll be in contact.
-Cheryl
