As we navigate the ever-changing landscape of the agricultural industry, it becomes increasingly vital for farmers in New Zealand to adopt effective financial management strategies. One essential tool in this regard is a cashflow forecast, a budgeting technique that projects the inflows and outflows of cash within a specified period. Today, we will explore why it is crucial for farmers to prepare a cashflow forecast using Figured and discuss the benefits it offers as well as the risks associated with not having a budget in place.
Benefits of Preparing a Cashflow Forecast:
1. Improved Financial Planning: A cashflow forecast allows farmers to gain a clear understanding of their financial position, enabling them to plan and allocate money, time and effort effectively. By analysing anticipated cash in and out, you can proactively identify periods of surplus or potential shortfalls, allowing for informed decision-making.
2. Better Decision-Making: A comprehensive cashflow forecast empowers farmers to make informed decisions regarding investments, expansions, and day-to-day operations. It provides insights into the availability of funds, highlighting potential limitations or opportunities for growth.
3. Proactive Risk Management: By preparing a cashflow forecast, farmers can identify potential cash flow gaps and address them in advance. This proactive approach enables better risk management and reduces the likelihood of financial difficulties arising from unexpected expenses or fluctuations in commodity prices.
4. Securing Financing: Financial institutions often require accurate financial projections to assess the viability and stability of farming operations. A cashflow forecast can be a powerful tool to demonstrate your farm’s financial strength and secure financing or strategic partnerships.
5. Peace of Mind: Having a well-planned cashflow forecast provides peace of mind, as it offers a sense of control over your financial future. It allows you to anticipate and prepare for upcoming expenses, ensuring you can meet your financial obligations without undue stress.
Risks of not having a budget in place:
1. Cash Flow Shortfalls: Without a cashflow forecast, farmers may face unexpected cash flow gaps, making it difficult to cover essential expenses such as loan repayments, wages, and input costs. This can lead to financial distress and affect the overall viability of the farm.
2. Missed Growth Opportunities: Lack of financial planning and budgeting may result in missed opportunities for expansion, capital improvements, or adopting innovative technologies. Failing to allocate resources wisely could impede the farm’s ability to capitalise on favourable market conditions or implement necessary upgrades.
3. Inefficient Resource Allocation: Operating without a budget makes it challenging to allocate resources optimally. This can lead to overspending in some areas and underspending in others, hampering overall productivity and profitability.
4. Limited Risk Assessment: Without a cashflow forecast, farmers may find it difficult to assess and manage potential risks effectively. This may leave the farm vulnerable to sudden market fluctuations, unforeseen costs, or emergencies.
At CMK Accountants we understand the importance of effective financial management for a thriving farming business. From monitoring expenses to optimising profits, staying on top of your finances can be a daunting task. That’s why we have been using and recommending Figured Farm Accounting software to help you develop better financial practices and help you achieve your goals:
Figured Farm Accounting is a cloud-based software specifically designed to cater to the unique needs of farmers like us. It provides a comprehensive platform to manage all financial aspects of your farm in one centralised location. With Figured, you can effortlessly monitor income and expenses, gain real-time insights into your financial position, create custom reports and budgets, and even forecast cash flow.
To streamline the process of cashflow forecasting, we recommend utilising Figured, a user-friendly farm financial management platform. Figured integrates with accounting systems and provides real-time insights into your farm’s financial performance, allowing you to create accurate and up-to-date cashflow forecasts. Its intuitive interface and powerful analytics empower you to make informed decisions, optimize your farm’s financial health, and plan for a prosperous future.
By using the power of Figured, you can build a stronger and more resilient farming business. With streamlined financial management and expert guidance, you’ll have more time and energy to focus on what really matters and grow a profitable and resilient business.
Ready to take your farm’s financial management to the next level? Contact CMK Accountants today and explore the possibilities that Figured Farm Accounting software can provide for your business.