{"id":63624,"date":"2019-07-18T01:00:29","date_gmt":"2019-07-18T08:00:29","guid":{"rendered":"https:\/\/www.hobbyfarms.com\/?p=63624"},"modified":"2020-11-03T03:24:44","modified_gmt":"2020-11-03T08:24:44","slug":"cash-flow-budget-planning-farm-finances","status":"publish","type":"post","link":"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/","title":{"rendered":"Plan Your Farm’s Finances With a Cash Flow Budget"},"content":{"rendered":"

Farming as a business contains pretty dramatic seasonal variation. This means it can be challenging to know the best time to make a large purchase or rearrange spending to avoid a cash crunch. One way around this is a financial projection method known as a cash flow budget. Cash flow budgets are designed to predict the monthly inflows and outflows of a business, which shows when you’re more and less likely to have extra cash over the course of a season. Such information is especially valuable to farmers.<\/p>\n

Here\u2019s how to begin compiling a cash flow budget for your farm.<\/p>\n

Project Your Inflows<\/h2>\n

The first step in assembling a cash flow budget is to quantify your farm\u2019s projected inflows, the money you expect your farm to take in over the course of the season. To project your farm\u2019s business activities, identify each of its sales channels, such as your CSA<\/a>, wholesale accounts or farmers markets. Next, review any records you have to determine how much each of these enterprises made during each month of the previous season. Place these numbers in a spreadsheet and adjust them to account for any changes you plan for your farm this year. If you plan to increase your CSA membership by 20 percent, for instance, scale up your CSA income projections.<\/p>\n

Aside from selling products, other inflows to your farm might come from investment sales if, for instance, you were to sell off old equipment or a parcel of land. Inflows can also come from financing in the form of a grant or loan.<\/p>\n

After you\u2019ve listed the different inflows you expect your farm to take in, create a row labeled \u201cTotal Inflows\u201d that adds up your inflows for each month.<\/p>\n

Project Your Outflows<\/h2>\n

Once you\u2019ve projected your farm\u2019s monthly inflows, the next step in a cash flow budget is to predict your farm\u2019s outflows, or expenses. Similar to inflows, the majority of your farm\u2019s outflows come from the regular expenses of operating a farm, including items such as labor cost, seeds and irrigation supplies.<\/p>\n

You can group your farm\u2019s operating costs in a variety of different ways, but I prefer to break them into direct and indirect expenses. Direct expenses include supplies that you purchase throughout the season to keep the farm running, including seeds, potting soil or irrigation<\/a> parts. Labor is also considered a direct expense, so include salaries for your workers and yourself in this section.<\/p>\n

Indirect costs (or overhead costs), on the other hand, are generalized expenses that keep your farm running, and include things such as accounting software or repairs to your tractor<\/a>. Your farm might also experience investment outflows if you purchase equipment, or financing outflows if you are repaying a loan.<\/p>\n

Once you\u2019ve listed your farm\u2019s projected outflows, create a row labeled \u201cTotal Outflows\u201d that sums up your outflows for each month.<\/p>\n

Compare Your Inflows & Outflows<\/h2>\n

By comparing your inflows and outflows for every month in this cash flow budget, you can see when your farm might face a cash crunch or when you can expect to have some extra money to make an investment you\u2019ve been deferring. To do this, create a final row at the bottom of your table labeled \u201cCash Balance\u201d that adds together your total inflows and outflows for every month. For an example of how to format your table, refer to the examples given in this handout<\/a>.<\/p>\n

Are there months where your farm\u2019s expected cash balance is negative? If so, maybe there are purchases you plan that you can delay. Or maybe, with enough notice, you can find a way to increase your inflows for this period. Maybe there are also months when you expect your farm\u2019s cash balance to be substantially positive. These can be great times to plan to save money or make larger purchases for your farm.<\/p>\n","protected":false},"excerpt":{"rendered":"

A cash flow budget shows you when your farm will and won\u2019t have extra cash over the course of the season, allowing you to plan accordingly.<\/p>\n","protected":false},"author":363,"featured_media":63649,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[57,427],"tags":[],"class_list":["post-63624","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-beginning-farmers","category-farm-management"],"acf":[],"yoast_head":"\nPlan Your Farm's Finances With a Cash Flow Budget - Hobby Farms<\/title>\n<meta name=\"description\" content=\"A cash flow budget shows you when your farm will and won\u2019t have extra cash over the course of the season, allowing you to plan accordingly.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Plan Your Farm's Finances With a Cash Flow Budget\" \/>\n<meta property=\"og:description\" content=\"A cash flow budget shows you when your farm will and won\u2019t have extra cash over the course of the season, allowing you to plan accordingly.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/\" \/>\n<meta property=\"og:site_name\" content=\"Hobby Farms\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/hobbyfarms\" \/>\n<meta property=\"article:published_time\" content=\"2019-07-18T08:00:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-11-03T08:24:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/img.hobbyfarms.com\/wp-content\/uploads\/2019\/07\/11120320\/farm-budget-finances-1322096822.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"462\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Robin Hackett\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@hobbyfarms\" \/>\n<meta name=\"twitter:site\" content=\"@hobbyfarms\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Robin Hackett\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/\"},\"author\":{\"name\":\"Robin Hackett\",\"@id\":\"https:\/\/www.hobbyfarms.com\/#\/schema\/person\/96875b48dceca56823362dbce15e1857\"},\"headline\":\"Plan Your Farm’s Finances With a Cash Flow Budget\",\"datePublished\":\"2019-07-18T08:00:29+00:00\",\"dateModified\":\"2020-11-03T08:24:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/\"},\"wordCount\":663,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.hobbyfarms.com\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/img.hobbyfarms.com\/wp-content\/uploads\/2019\/07\/11120320\/farm-budget-finances-1322096822.jpg\",\"articleSection\":[\"Beginning Farmers\",\"Farm Management\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/\",\"url\":\"https:\/\/www.hobbyfarms.com\/cash-flow-budget-planning-farm-finances\/\",\"name\":\"Plan Your Farm's Finances With a Cash Flow Budget - 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