Understanding of the financial impacts of a tight finish
As harvest approaches, many farmers are facing a yield below their early season expectations. A full moisture profile in Autumn was followed by low winter and spring rain and excessive frost in many areas. Sound familiar?
It may be of little solace to appreciate you are not alone, that this circumstance is widespread. What may provide solace is if you have a clear understanding of the financial impacts of a tight finish. Towards the end of the growing season, overdrafts are often stretched to the limit. Are you under pressure to start selling grain to reduce the overdraft, or are you in control of the timing of grain marketing decisions? Are you sure about your position?
It still surprises me how many farmers do not prepare monthly cash flow projections for the production year and then monitor budget to actual through the year. While profit is important in the medium term, cash is indisputably king in the short term and having a clear picture of the business cash flow is critical in effective farm business management. Certainty around your cash position can ease your mind as a sub-par harvest approaches. It will give you clarity around grain marketing decisions and timing, any in a tight year, perhaps even more importantly - it puts in in the box seat to seize the opportunities which may arise (can you afford that mob of wethers you’ve been thinking about running through the canola crop?).
The monthly cash flow isn’t just a job to keep the bankers happy, tracking it through the year is essential to running a top farm business.
Until next time, Tony.
To get in touch with Tony or to book a farm business financial workshop click here.