Understanding what your best, worst and average cash outcome might be can place you in a powerful position. Creating one or several cash flow scenarios does not have to be a difficult task. With the right tools and assistance this can be a quick and easy process, giving you real insight into your financial future.

Cash flow budgeting helps you to understand the financial impact of your on-farm decisions. This improves decision making day-to-day, season-to-season and increases the likelihood of each decision being a profitable one.

Being uncertain about your financial future and how you are going to meet your financial obligations can be stressful and seriously impact your emotional, mental and physical health if left unchecked. A cash flow budget is a great way to better understand how far your money might take you in the short, medium and long term.

These days, having an up-to-date cash flow budget is necessary if you want to access new finance or tick off your annual bank review. There is a good reason for this; a cash flow budget helps you and your bank manager to work out how much money you might need in the future, how you are going to service your debt and meet your financial obligations going forward.

What Is Cash Flow Budgeting 

A cash flow budget is a way of monitoring all cash coming into (+) and leaving (-) your business. It consists of the following:

+ Cash coming into the business from operations (e.g. sales, income)

+ Cash from capital assets sales  (e.g. machinery sales)

+ Non-farm cash received if used to pay farm expenses (e.g. off-farm wages)

+ Cash in from financing activities (eg. new loan proceeds)

- Cash outflow from operations (e.g. cropping, livestock and overhead costs)

- Cash used to purchase capital assets (e.g. machinery & livestock)

- Cash out from financing activities (e.g. farm loan interest and principal repayments)

- Non-farm cash expenses including personal/family expenses

The result is your net cash flow. Your net cash flow needs to break even or show a surplus to ensure you can meet your financial obligations.

How is a cash flow budget different to your profit and loss budget?

It is common to be confused between a cash flow statement or budget and a profit and loss statement because they can be quite similar.

The two key differences are:

1. A cash flow statement or budget does not include movements in non-cash items such as depreciation and inventory, but a profit and loss will.
2. The cash flow statement or budget will record the cash leaving the business to purchase new capital assets, and cash coming into the business from new loan proceeds. The profit and loss will not.

What tools and assistance can help me get started?

When setting up a cash flow budget, creating something quick and easy that suits your circumstances often depends on the tools you use and assistance you get.

Microsoft Excel can be cheap to install and easy to use (with the right training). This is a great tool if you want a flexible template and you have the time to invest in training and setting up a template with your farm data. However, it is easy to make formula errors if you don’t have the right skills and training.

If you are not confident with Excel, farm management software often has a wide range of options and reports available, and it can be easy to use with less training and no formula errors. The downside is it may be more expensive to install and maintain.

If you are not confident with either of these options and you are time poor, another option is getting external assistance. Rural Financial Counsellors are skilled in cash flow budgeting and can assist with regular budget updates.

It’s all too easy to put cash flow budgeting in the ‘too hard basket,’ but setting up and regularly updating a cash flow budget is a great way to make your life easier. As a farming business owner, your risk of being unable to pay your bills when they fall due and ending up in financial hardship will be reduced.

Contact your local Rural Financial Counsellor or call RFCS NSW on 1800 319 458 to find out how we can help your business take advantage of the benefits of cashflow budgeting.

The below article is a commentary by CEO of RFCS NSW, Craig Hough following his recent attendance at the ABARES outlook conference. 

The annual Australian Bureau of Agricultural and Resource Economics (ABARES) Outlook conference was held in Canberra on 5-6 March 2024. Topics included economic outlook, farm performance, markets and trade, risk and resilience, workforce, R&D, biosecurity climate change, water, indigenous engagement and consumers. A range of speakers, including the Minister for Agriculture, and panels from government, industry and not for profit agencies presented on the topics.

The key highlight was agriculture’s gross value of production (output x price) is forecast to rise by 6% to $85 billion in 2024–25. This is due to improving seasonal conditions and price recovery across most commodities. Despite this the nominal value of agricultural exports is forecast to fall by a further 5% to $64 billion, which is on the back of a 14% fall in 2023–24. The rebound forecast coupled with three consecutive years of strong farm production, returns and equity growth, in particular land values, are mitigating the impacts of a 7% decline in prices and high production costs, including rising interest rates, in 2023-24.

The headlines for the sector in each topic area are:

• Markets and trade – Currently there are about $850 billion in agriculture support subsidies in existence around the world. A significant portion of this is trade distorting and causing environmental harm i.e. excessive production. As one of the least subsidised in the world Australia benefits more from free trade agreements and reduction in non-tariff barriers from many of its competitors. A concerted effort to remove and/or redirect the subsidies via the WTO and other international processes will not only improve market access but help the world meet its sustainability challenges.
• Risk and resilience - Various government initiatives are being delivered to reduce the impact of and strengthen recovery from natural disasters including drought. One of the flagship initiatives is the Australian Government’s Future Drought Fund. The government has been consulting with industry stakeholders to determine how the next tranche of $400 million over four years from 1 July 2024 will be spent.
• Workforce - Farm worker shortages are now being resolved from the country’s economic slowdown and softening of the labour market and record level immigration. The challenge going forward will be more about how the sector maintains a workforce that is skilled for managing automation like AI and undertaking a more diverse range of tasks on the farm and down the supply chain.
• R&D – Step change is required to increase Australian agriculture’s productivity. A 0.6% productivity growth rate over the past 20 years is not enough to improve Australia’s international competitiveness and mitigate the impacts of climate change.
• Biosecurity - A new biosecurity levy will be imposed on 1 July 2024 to fund the Australian Government’s Biosecurity Plan. Importers will pay 48% of the biosecurity costs, taxpayers will contribute 44%, producers 6% and Australia Post 2%. The funding split is based on the principle that biosecurity is a shared responsibility between risk creators and beneficiaries.
• Climate change - Agriculture’s share of emissions is forecast to increase as other sectors like stationary energy reduce their emissions at a greater rate over the near term. The government is currently developing an Agriculture and Land Sector Plan to help drive emissions reduction and climate adaptation on farm and through the supply chain.
• Water – Completing the Murray Darling Basin Plan in full is a priority for the Australian Government. The Commonwealth Environmental Water Holder, the government agency responsible for trading and delivering water to enhance environmental outcomes currently holds approximately 15% of entitlements in the Basin. ABARES analysis has found the impacts of environmental water trade on irrigators are largely neutral.
• Indigenous engagement - Indigenous farming, including the use of fire, has been around for some 60,000 years. Engaging indigenous people on country could help protect against extreme bushfires, generate more products that have benefits such as a health boost, increase reconciliation and aboriginal wealth via employment and business profitability.
• Consumers – More consumers are wanting information on providence and credentials of farm products. This not only relates to quality and safety but animal welfare, emissions and other ethical standards. Traceability, transparency and responsiveness to sustainability frameworks are critical to not only servicing these requirements but maintaining the sector’s social licence to operate.

A copy of the Minister’s speech can be accessed via:

Read more

A copy of the March 2024 Agricultural Commodities Report by ABARES can be accessed via:

Click here

For further information on the conference, including the program and speakers, click on:

Find out more

When running a business we often get caught up in day to day tasks and don’t have the opportunity to look up, set out where we want to be and map out the best way to get there.  

At Rural Financial Counselling Service, NSW we are all too familiar with the age-old adage ‘failure to plan is to plan to fail’ as we’ve seen many great farming businesses struggle when some goal setting and business planning was in order.  

The good news is it doesn’t have to be complicated and our experienced Rural Financial Counsellors can help you through every step. 

What’s involved with setting goals?

The good news is it doesn’t have to be complicated and our experienced Rural Financial Counsellors can help you through every step. 

So what’s involved with setting goals?

The aim of goal setting 

Let’s be clear, goals are not your dreams for the future. They may start that way, but goals are more concrete.

It’s all about getting clear on the direction of your farming business and your life – whether that’s in the immediate future or longer-term such as succession or sale planning. 

Goals can help to keep you focused, drive your strategic decisions and help future-proof your business.

How to set goals 

Setting clear and effective goals can be easier than you might think. We’ve pulled together our top tips to make sure your goals will actually serve your business.

1. Make them SMART – specific, measurable, attainable, realistic and timely

Ask yourself, are they focused, detailed and easily understood? 

How can they be measured so I can I know when I have achieved them or need more work? Are my goals achievable? 

What’s the deadline for reaching my goals? 

For example: 

Un-Smart Goal:

I need to manage the farm finances.

Smart Goal:

Within the next month I will ask for assistance from the Rural Financial Counselling Service to better understand the farm finances.

2. Write them down: 

The act of turning the abstract thought into words on a page is a powerful process. It not only makes them feel within reach, but studies show that it is also linked to a greater commitment to achieving those goals. So, once you’ve written them down, stick them somewhere you will see them – on the fridge, in your office, your workbench or tractor dash – to keep them front of mind. And, of course, writing down your goals also makes the whole process more transparent when it comes time to assess progress.

3. Balance the needs and wants of you, your family and your business:

 The secret to a meaningful business is to make sure your goals have room for success in your personal life as well as your business. And when it comes to farming, considering your family is often a vital part to the success puzzle.

4. Ensure your goals are aligned with the outcome of any business review activities you have
undertaken: 

Joining the dots on your current business position and where you want to go is all part of being realistic and sets you up for a genuine win.

5. Consider both long and short-term goals: 

Start with two years first (e.g. finish the fencing program; complete tax planning for this year), then set your sights further down the track (enrol in study; look at ways to retire from full-time farming). Having one eye on longer term goals helps make short term goals more manageable because your long-term direction will anchor you if things are knocked off track. 

6. Prioritise:

 Consider your goals in terms of timeframes (short term vs. longer term) and importance to you, your family and your business and rank/treat them accordingly. 

What comes next? 

While the advantages of setting goals are many, some people find that the process of reflection needed for goal setting also helps them reconnect with their purpose and reminds them why they chose farming life in the first place. 

A positive effect of goal setting is that often people also find they have a renewed interest in their business and greater motivation to keep going. 

Of course, goal setting on its own will not drive your business forward, but it is an important starting point to develop a plan to get to where you want to be. One by one, each goal you achieve helps you move towards a successful future.

If you could do with some support getting started, talk with one of our qualified rural financial counsellors today.

A Free Financial GPS To Get Your Farm Back on Track

Free, confidential support provided from Rural Financial Counselling Service NSW (RFCS NSW) is available to help you navigate the way forward following recent flood and severe storm events. 

Governments have made a range of financial assistance available to primary producers and rural small businesses, including Special Disaster grants and Disaster Recovery loans. While these crisis relief measures provide welcome assistance, for many farmers and small businesses the long-term recovery journey is now getting underway and may require additional support. 

RFCS NSW’s local Rural Financial Counsellors are experts at reviewing financial information and can work with you to review past performance. 

By helping you to understand your current position we can begin to analyse future business options.  This comprehensive analysis can then be used to create a tailored recovery plan, incorporating business goals and objectives, to get your business back on track.  

Planning and goal setting in your business can assist in times following crisis – working like a GPS to guide your business to get you where you want to go. RFCS NSW plans with you to ensure that a natural disaster doesn’t result in financial disaster. 

This planned approach helps ensure that whole communities and towns recover. A farmer spending money in town supports a local business to stay open and offer employment.  That business can make plans, even look at expanding, and they can continue supporting the community in ways such as offering sponsorship for the local football team or donating a prize for the school raffle. We can each play a part in community recovery because it really does start with one. 

RFCS NSW offer a free and confidential service specialising in agricultural and rural small business financial management. Our local Rural Financial Counsellors are skilled in business recovery and can guide you through the preparation work to gain the clarity and confidence you’re after. 

Some of the services and support RFCS NSW can provide include:  

Succession planning:

We’ve all heard the horror stories about farm succession planning gone wrong – farms being sold, family members who refuse to speak, heartbreak on all sides. But it can be avoided.  

How we can help: 

As a trained and independent listener, one of our rural financial counsellors can have those all-important initial discussions with you and your family about succession planning.  

We can:   

• Help you understand what is involved and how best to navigate the process  
• Advise which professionals to engage to help you with your succession plan  
• Review the past performance of the enterprise  
• Build financial skill sets within the family and road-test options through cash flows and enterprise budgets. 

Farm budgeting, forecasting & cash flow analysis:

Cash flow budgeting can help you understand the financial impact of your on-farm decisions. Some farmers believe that seasonal conditions are too variable to rely on cash flow budgeting, but this is exactly why your farm should have a cash flow budget. 

We will help you to: 

• Create an accurate cashflow budget 
• Better understand your farm’s cash position 

• Understand what your best, worst and ‘average’ cash outcomes might be 

Farm debt mediation:

Farm Debt Mediation (prescribed under the Farm Debt Mediation Act 1994) is a structured negotiation process in which the mediator, as a neutral and independent person, assists the farmer and the creditor to communicate effectively, to resolve matters relating to farm debts, and to formalise that resolution in an agreement. 

Mediation is a simple, voluntary, and confidential process that is quick, accessible, and affordable. 

We can: 

• Explain the Farm Debt Mediation forms and process 
• Help to prepare for mediation including finding the right mediator 
• Support you and other business partners to consider options realistically 
• Provide you with support and assistance throughout the mediation process including mediation 
• Help you with meeting agreed outcomes 

Bank reviews & relationships:

Annual business reviews can be a stressful part of owning an agriculture business. If you’re not sure about the information you need to provide, haven’t kept things up-to-date, or you’re worried that things don’t look great, it can make bank reviews even more nerve-wracking.  

We will:  

• Spend time with you before your review or loan application to get to know the details of how your business has been performing  
• Prepare explanations for any issues or variances in actuals versus budgets or predictions  

•  Support you to consider and document your business goals, plans and contingencies for dealing with unforeseen changes in circumstance.  

Help refinancing debt including government debt:

Accessing rural loans and government assistance can sometimes feel overwhelming. There are a variety of rural finance grants and farm loans available, each with different eligibility requirements, but support is available to help you understand the differences.  

We can:  

• Advise what government assistance, rural finance grants or loans you may be eligible for in the short and long term  

• Help you understand farm loan interest rates in Australia 
• Tell you what documents you need to provide to secure a rural loan or grant 
• Help you consider long-term business changes to improve your financial position. 

RFCS NSW is a not-for-profit organisation with a goal to strengthen communities by helping rural and regional businesses be prepared, responsive and sustainable.  

Lost in your farm’s finances? We’ll help you find your way. Call us anytime on 1800 319 458 and we can help get your financial future in place.