Financial Planning Tips for the Start of a New Farming Year

The opening of a new farming year represents the most appropriate moment to get your financial house in order so that cash flow requirements, operational requirements and the plans of borrowing are well charted out before the pressures of planting and production are registered.

Plan Your Cash Flow Early

Cash flow is the blood in a farming operation and starting the year with a cash flow forecast will enable you to know the source of money, which is to be expected and where it will be required to go. Begin by listing all the known costs, the seed, fertiliser, chemicals, equipment repairs, labour and other inputs, and then attempt to guess when and how much revenue is expected to be gained on the sale of crop, livestock or other origin, etc.

You can also raise operating funds in advance or plan expenditure so that it does not become constrained at the time bills are due by determining in advance what shortfalls may be incurred. This is because farmland financial planning allows you to use time to your advantage, ensuring operations run more smoothly while benefiting from economies of bulk purchasing and other cost-saving opportuniti/es.

Assess Your Operating Loan Requirements.

Operating loans are an important financial instrument for a number of farming operations. They assist in covering part of the seasonal expenses as you await your revenue to flow in, and given a prudent use will even manage to equalise the cash flow between times of the year.
You should look at the amount of financing you actually require at the first stage of the year by banking your estimated expenditures against your estimated revenues. You can only borrow what you need and you have saved on interest and you have also avoided the burden of unnecessary debts. When you get financing early so as to ensure that you are able to have the funds in place before even the busiest season has arrived then you need to relax and know that you are going to have funds when the time to plant or to carry out some other activity is at its best.

Prepare a Workable Seasonal Budget.

An operating budget is a financial guide for the whole season. To do will indicate real needs:

Fixed and variable costs: Fixed costs are fixed in nature, such as equipment payments and land rent, whereas variable costs are variable to market conditions and acreage such as seed, fuel and fertiliser.

Make a low estimate: You should base your income estimates on the past performance of yields and some realistic market prices then compare the expected costs with the expected income. This is a very conservative method of spending.
Check and revise: Compare yourself with your budget across the year. When costs are greater than you thought or you receive revenue in a different way than you had planned, change your plans accordingly so that you are on schedule.
Having a good budget allows you to make decisions more intelligibly and allows you to prioritise the investments you need to make and manage yourself.

Partnership with a reputable farm financier.

The difference such as having a choice of a local agricultural lender who is familiar with the seasonal cycles and the problems of farming can make a big difference in your financial planning. An agricultural lender is in a good position to provide financing solutions to seasonal requirements such as farm planting, harvest, and equipment acquisition.

Establishing a good relationship with such a lender is also tantamount to having a partner who knows how to operate and can assist in coordinating the timing and repayment of loans so as to fit payment schedules in with the cash flow patterns.