Cash Is King!

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Gerard Finnan (Sherborne)

Cashflow is the lifeblood of any business.  Hard work, a good idea and a commitment to put a plan into practice can all fall down if sufficient cash is not available, even if the enterprise is immediately profitable.  For established farm businesses in 2022 the same principles are even more pertinent.  Doing quite a few budgets currently at present shows that though well-run businesses are still profitable, they are running out of cash in some cases.  The two loads of fertiliser that were delivered and paid for this time last year is the equivalent of two thirds of a load delivered and paid for this year at this time.  The later that commodities are bought in smaller quantities, the more paid per unit.

By planning and measuring and monitoring, you can manage cashflow much better and never has there been a more important time.

I hear you say that it’s impossible to budget a cashflow with the uncertainty of future prices.

Here are three good reasons why it is more important than ever to budget!

  1. Budgeting is an early warning indicator even 3-4 months ahead, so to approach the bank early if extra funds are required.
  2. If you budget ahead with the current prices for all including any prices for items forward bought, like feed fertiliser, milk powder etc.  If things don’t stack up, start looking at what you could do to improve the situation, e.g., Delay capital expenditure, Buy cheaper bulk feed now rather than expensive fertiliser, Cull passenger cows in your herd, Soil test and target fertiliser at the most responsive land, spread payments over a longer period until the income is realised etc.
  3. Peace of mind to allay uncertainty.  If you bury your head in the sand …… the problem won’t go away.  Budgeting is a habit and a discipline of successful businesses.  The more you do it the easier it becomes.

Output Is Vanity, Profit Is Sanity & Cash Is King!  How will your business manage cash in 2022?  Turnover is going up, but costs are rising faster.  If you use the monthly milk cheque as barometer to manage cash, it is only half the story and a dangerous path to tread in the next 12 months with high inflationary pressures on costs.  Contact gerardfinnan@fcgagric.com or your local FCG Office today for help in putting you back in control of your cashflow!

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