Cash flow is king for agribusiness

Posted on 15/4/2019

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Overview:

Owners and managers of dynamic farming businesses need to have the right tools, systems and advisers in place that allow proactive management of both their business and banking needs. Let’s talk about why cash flow is king for agribusiness…

Well, fortune tellers as far as financial forecasting goes! Owners and managers of dynamic farming businesses need to have the right tools, systems and advisers in place that allow proactive management of both their business and banking needs.

Cash flow is King

Cash flow is crucial to successful businesses and is often called the ‘king’ of financial management. If you are making decisions to sell grain to meet cash flow needs, or make agronomic or strategic business decisions to suit cash flow, it is likely that you don’t have the right financial facilities in place to run your business at its best.

As owners and managers of dynamic farming businesses, you need to ensure that you have the tools, systems and advisors in place to allow you to proactively manage your business and the banking facilities that support it. This, along with your grain marketing strategies, form a critical part of your ability to achieve business objectives.

You’re only as good as your last forecast

By working with your accounting partner (and other key advisers) to develop financial forecasts and budgets before the start of the coming season, you will in the best position to confidently predict the cash flow requirements for the year ahead.

This information allows you to proactively work with your banking advisers to communicate your requirements, ensuring you have the most appropriate banking facilities in place.

The benefit is that this provides you with the ability to maximise your grain marketing options for prior season’s commodities, whilst ensuring you can make sound strategic decisions for the cropping season ahead.

Forecasts and budgets are not something you ‘set and forget’. Monitoring the businesses actual results against budget, together with your knowledge of the season as it progresses, will flag any potential variations. This will proactively identify any additional cash flow requirements, allowing you to make informed decisions and capitalise on potential opportunities.

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